Yes, you can buy a car while in bankruptcy. In fact, most people in chapter 13 find a need to replace a car at some point during their case. Face it, cars break down, are damaged in accidents, or become stolen. Many of my clients purchase vehicles while in bankruptcy.
Generally, in the Southern District of Illinois, one needs to get trustee approval in order to finance a car purchase. This is a simple process that involves submitting the terms of the sale, including the cost of the car, the amount of the loan, the interest rate and the monthly payment, to the trustee for review. As part of this process, the trustee will ask to see your current monthly income and your current monthly expenses to determine whether you can afford the car payment.
The first step is to find a car to buy, then you need to obtain the loan terms. So, I tell clients to go out and make their best deal and bring the information to my bankruptcy office and I will help them gain trustee approval of the deal. In most chapter 7 cases, the lender prefers you complete your discharge before they will offer you financing. Nothing requires a dealer to make you a loan. If you have trouble finding a dealer willing to sell you a car, keep looking until you find one who will work with you.
Andy Miofsky, Esq.
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Last modified: May 8, 2011