Buying a Car After Bankruptcy

Bankruptcy is a very traumatic experience for many people. For most, the bankruptcy filing was a result of a sudden dramatic economic change in their lives, whether it was the loss of a job, overwhelming medical expenses, or divorce. If you considering buying a car after bankruptcy you may be considered a good credit risk by many sub-prime auto finance companies.

After your bankruptcy is complete you have little or no debt left. In other words you have more disposable income from which you can make a car loan payment. Most lenders calculate your Debt to Income ratio when deciding to approve or decline your auto loan request. Prior to completing the bankruptcy, most people have a high Debt to Income ratio whereas after bankruptcy most people have a low Debt to Income ratio.



Another consideration is that customers whom have filed a chapter 7 bankruptcy, which is a total dissolution of debt, cannot do so again for around eight years. Since most car loans are 6 years or less the lender is assured that their loan won't be dissolved in a bankruptcy. (A chapter 13 bankruptcy can be filed at any time, but under this type of bankruptcy the lender still gets their money back, although slower than stated in the finance contract).

Probably the biggest reason that people after bankruptcy car considered a good car buying risk is that, generally speaking, after bankruptcy people want to re-establish a good credit rating so they can get back to the life they had.