Skip the auto shop - Our mechanics make house calls

How to Buy a Car After Bankruptcy

gavel and pen over bankruptcy paperwork

Bankruptcy does not have to mean the end of the world for you financially. Many individuals recover fully after a bankruptcy and even purchase a car soon after it is discharged. By keeping certain factors in mind when trying to purchase a car after a bankruptcy, you too can get a new vehicle.

Part 1 of 2: Types of bankruptcies

When it comes to bankruptcies, there are three types that you can file for as an individual: Chapter 7, Chapter 13, and Chapter 11, though a Chapter 11 bankruptcy is usually reserved for individuals whose debt falls above the limits of a Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is for individuals who do not have the ability to repay their debt and is best suited for unsecured debt. It is the most common form of bankruptcy and allows debtors to protect some of their assets up to a certain amount.

A Chapter 13 bankruptcy, on the other hand, is designed to allow debtors to repay their debt over time. Supervised by the court, individuals who file for a Chapter 13 bankruptcy must get the court's permission before incurring any more debt, including buying a vehicle.

The best thing about bankruptcies is that they allow you to discharge certain debt, removing it from your obligation to pay it back. The downside is that a bankruptcy remains on your credit record for a number of years, lowering your credit score and making it more difficult for you to buy items, such as a vehicle, that are dependent on your credit score.

It is not impossible to buy a car after a bankruptcy, but expect to pay a higher interest rate, pay a larger down payment, or be restricted in the value of a car purchase depending on the bankruptcy type.

Part 2 of 2: Steps you can take to purchase a car after a bankruptcy

Rebuilding your credit after a bankruptcy is a long and arduous task. With it taking five years to pay off a Chapter 13 bankruptcy and another seven years for it to fall off your record after that, it seems like a long time before you can get back on track. A Chapter 7 is no better, taking at least 10 years to come off of your record. Luckily, you do have some options when buying a car following a bankruptcy.

pen getting ready to sign as co-signer

Step 1: Get someone to cosign. Find someone to cosign for you when you buy a vehicle. The cosigner needs a good credit score, usually over 700, to qualify.

They also need proof of stable employment and residence. The longer the better, but most lenders prefer at least five years.

Remember to make your payments on time or the cosigner becomes liable for the loan amount.

sample equifax credit report

Step 2: Rebuild your credit. By taking on a little debt and paying it off, you can improve your credit.

Apply for a credit card and use it for small purchases. Then make sure to pay the full balance on time every month. This can gradually push your credit score up.

Step 3: Make a larger down payment. Another option when buying a car after a bankruptcy is to pay more up front.

You can also use a trade-in to help reduce the amount you owe. Another possibility with a trade-in is selling it outright, and then using the cash from the transaction to help pay for your next vehicle.

  • Tip: As you rebuild your credit following a bankruptcy, your credit rating should gradually improve, especially if you make all of your payments on time. Take advantage of your improving rating and refinance your car loan, which you can typically do every 6 to 12 months.

While a bankruptcy is damaging to your credit and can make it more difficult to acquire the things you need, such as a vehicle, you do have options. By making sure you pay what you owe on time, making a larger down payment when buying a car, or asking someone with good credit to cosign for you, you can still purchase a car even with a bankruptcy.

The statements expressed above are only for informational purposes and should be independently verified. Please see our terms of service for more details

Skip the repair shop, our top-rated mechanics come to you.

At your home or office

Choose from 600+ repair, maintenance & diagnostic services. Our top-rated mechanics bring all parts & tools to your location.

Fair & transparent pricing

See labor & parts costs upfront, so you can book with confidence.

12-month, 12,000-mile warranty

Our services are backed by a 12-month, 12,000-mile warranty for your peace of mind.

Get A Quote

Ask a Mechanic
(100% Free)

Have a car question? Get free advice from our top-rated mechanics.

Ask A Mechanic
Over 10,000 questions answered!

Need Help With Your Car?

Our certified mobile mechanics make house calls in over 2,000 U.S. cities. Fast, free online quotes for your car repair.


Post a question and get free advice from our certified mechanics.


More related articles

P0121 OBD-II Trouble Code: TPS "A" Circuit Range Performance Problem
P0121 code definition Throttle Pedal Position Sensor/Switch (TPS) A Circuit Range Performance Problem What the P0121 code means P0121 is a generic OBD-II code which indicates that the Engine Control...
How to Transfer a Car Title in Idaho
In order to prove ownership of a car, you must have the title. However, when a car is sold, given away or inherited, the title needs...
P2422 OBD-II Trouble Code: Evaporative Emissions Control System (EVAP) Vent Valve Stuck Closed
Diagnostic Trouble Code (DTC): P2422 P2422 code definition Evaporative Emissions Control System (EVAP) Vent Valve Stuck Closed Related Trouble Codes: P2441: EVAP Vent Valve Stuck Open EVAP trouble...

Related questions

Q: I already agreed with an owner of 2008 limited edition v6 Prado. Average fuel consumption and mileage are different

Hey there. The fuel usage of 26L per 100km sounds like it is using too much fuel, or there is a problem with the display. I would suggest having a mechanic inspect the car first before you decide to purchase...

Q: What do you think of Kia as a brand?

Q: What is a fair value

Hello. A salvaged title generally deducts 20-40% of the Kelly BlueBook value. I would look at to determine the fair market value of your vehicle, and then deduct 20-40% dependent on how well it was repaired. Be sure to...