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Car Loans And Bankruptcy

If you are considering buying a car there are some things to consider about the timing of your purchase. We can't always predict a financial hardship, so it is important to know how your auto loan could be affected both before and after a bankruptcy. 

Before Filing Bankruptcy

Rarely does someone experiencing financial difficulty go out and buy a new car for the sake of it. Often times people just need a vehicle to get to and from work. There are two potential problems with buying a car prior to filing for bankruptcy. The first issue arises from suspicions of debt accumulation before filing. If you take out an auto loan within the six months leading up to your filing the court may view this as suspicious and deny the eligibility of the debt or even dismiss your filing. This is because the laws are written to prevent people from accumulating lots of debt and walking away from them on purpose. The second issue to consider is how much, if any, of the vehicle's value would be exempt from liquidation in a Chapter 7 filing. The federal exemption law only covers up to $3,675 worth of a vehicle. Amounts above this threshold may need to have the debt reaffirmed in order for your to keep it. Your Louisville bankruptcy lawyer can better determine what the best way to protect your vehicle will be in your case.

After A Debt Discharge

If you had debts discharged in a recent bankruptcy your credit is really your only challenge in taking out a new auto loan. Chances are your credit is in a much better position to be repaired after a debt discharge than before you filed for bankruptcy. With debts and delinquent accounts resolved you have the opportunity to write a new, positive credit history. Take some time to work on rebuilding your credit before applying for an auto loan. You will be much better offer with a cheap paid for car while you recover your credit than stuck under a high interest auto loan.

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