Buy A New Car Before Filing For Bankruptcy
If you are having financial problems and you are taking into consideration filing for bankruptcy, one of the issues that you need to think about is your car. First of all, if you are thinking about Chapter 7 and you are in the market for a car, you can put a financed vehicle on your personal credit report which will help you rebuild your credit score after filing for bankruptcy.
If the credit score that you have now is pretty good, it is recommended to buy a new car before filing for bankruptcy. If your score is just ok, you can still buy a new vehicle depending on the financing terms. If the credit score is very bad, it would be advisable to stick to your current car before filing and then save some money until you can afford a new one.
You will have to get in touch with your attorney in order to find out which exemptions will be applied and how much equity will you be allowed to protect. For those of you filing for Chapter 13, the same analysis is applicable before filing for bankruptcy. The procedure is different if you have filed for Chapter 13 but you now need a new car. In this case, you will have to get the permission of the Court in order to be allowed to enter into a contract that allows you to purchase a car. Take into consideration that this varies from state to state and also from judge to judge. For this reason, we highly recommend that you talk to your lawyer in order to find out what you can do in this case.
If you are lucky enough, maybe your attorney has a relationship with a car dealer, which means that both of them know the process and have been through the entire procedure and they know what you need to do for acquiring a new vehicle.
You need to know that due to the fact that you are a debtor, buying a vehicle will increase your responsibilities under the Chapter 13 Plan of Reorganization. If you will be able to make all of the payments on time, it will help you a lot in rebuilding your credit during the bankruptcy and after it.
For those of you that want to buy a new car before filing for bankruptcy but want to avoid all of these legal issues, you could talk to a mechanic and see what you can do for prolonging the life of the car that you own at the moment. Another option would be to talk to your friends and see if they have a car that they would be willing to loan if yours no longer works. If you do choose to buy a new car before filing for bankruptcy, your interest rate will be significantly lower as lenders consider those that are in bankruptcy as a higher risk and as a consequence, they charge higher interest rates.
Source: bankrate.com, bankruptcylawnetwork.com
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