How do I finance a car while in Bankruptcy?

It is always best to make sure you go into a Chapter 13 bankruptcy with a reliable vehicle that you intend to finish your case with because financing a vehicle during bankruptcy is a time consuming and difficult process. If you own the vehicle when you file for bankruptcy, you may even be able to cram down your car payments or reduce the interest rate. However, if you find the need to obtain a different vehicle during your case due to a car accident or car breakdown, you will need to obtain permission from the Trustee and Court to do so.


To obtain a new loan, you first must find a lender willing to lend to you while in bankruptcy. Make sure the loan is a purchase and not a "lease to own". You will need the following information (contact your attorney for the form to fill out):

  • Make/Model Year of Vehicle to purchase (or similar)

  • Mileage of vehicle

  • Purchase price of vehicle (this must be consistent with what the vehicle is worth, you can't overpay for a vehicle)

  • Interest rate

  • Loan term (36 months, 60 months, etc)

  • Payment amounts

Remember that your plan payment may not go down if you are purchasing a vehicle, so make sure it fits into your budget! You do NOT need permission from the Court to purchase a vehicle with cash from your own personal savings.


Note that car loans are often a primary cause of filing for bankruptcy, make sure any vehicle you purchase will last until you pay off the loan and don't overpay! Purchasing a 10 year old vehicle on a 6 year loan may not be a good idea, by the time the loan is paid off, the vehicle will be 16 years old!


Attorney Allison Greenlee Korr handles cases in Kalamazoo, Battle Creek and all surrounding counties, call today for a consultation. 269-381-4471