Chapter 13, Bad Credit and Car Loans | DriveToday | 98% Bad ...

Posted on: August 8th, 2012 by credit

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The world?s economy today has been compared to the times during the Great Depression. Currencies are weak, prices are sky high and unemployment rate is up. Meanwhile, people are struggling to make ends meet and some of them are not successful in doing so. For these individuals, they have no choice but to file for a Chapter 13.

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What is Chapter 13?

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Chapter 13 is also known as the wage earner?s plan. In this type of bankruptcy, the individual will undergo a financial reorganization which is administered by a federal bankruptcy court. Unlike in a Chapter 7 bankruptcy where the individual?s assets are seized to pay for his or her debts, a Chapter 13 bankruptcy allows an individual to come up with a plan to repay all or a part of his or her debts. This plan usually involves an installment payment scheme that lasts from three to five years.

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Advantages of Filing a Chapter 13 Bankruptcy

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There are several advantages of filing a Chapter 13 bankruptcy. For one thing, people who filed this type of bankruptcy can save their homes from being foreclosed. They are also able to rearrange their debt payment and have it extended while the Chapter 13 is still in effect. This type of bankruptcy also protects the co-signers from any liabilities.

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Car Loans Amidst a Chapter 13 Bankruptcy

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One of the disadvantages of filing a Chapter 13 is that it will stay in a person?s credit report up to 10 years. The good news is that he or she can get a new loan, such as a car loan bad credit after a year or two into the bankruptcy. Nevertheless, a person should get the approval of a federal bankruptcy court before transacting such a loan.

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In order to qualify for a car loan bad credit during a Chapter 13, you need to get an authorization from the trustee of the bankruptcy so you can borrow money. Without this, you will not even be considered for such a loan. The approval of the trustee is needed because there have been cases where the debtor added his or her new car loan bad credit to the list of creditors in the bankruptcy; payments for this new auto loan should be separated from the list of creditors in the repayment plan. Keep in mind that you need to include the monthly payment amount when you get approval from the trustee.

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Sadly, there is no guarantee that once you get the trustee?s approval to get a new car loan bad credit, the bank or the lending institution will approve your application. Some finance companies will not finance your car when you are in a bankruptcy. What you need to do is be smart and be patient when asking for this type of loan.

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Tags: bad credit car loan, car loan bad credit

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Source: http://www.easyautolenders.com/car-loan-articles/2012/08/chapter-13-bad-credit-and-car-loans/

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