If you are considering filing for bankruptcy, you might be concerned about transport. You may have heard of people losing their car when they file and being unable to secure a loan for a new one.
If you file under Chapter 13 and have outstanding debt on a vehicle loan, you get a chance to restructure things. Provided you meet your car loan payments under the new schedule, you get to keep it.
If you file under Chapter 7, you might still be able to keep your vehicle. While the bankruptcy trustee can sell your assets to pay back creditors, the law recognizes that leaving you homeless and carless is not in anyone’s interest. Georgia law exempts $21,500 of home equity and $5,000 worth of motor vehicle equity from being sold. If your car is worth more, you may be able to seek more favorable conditions.
How will bankruptcy affect my ability to take out a new car loan?
Filing for bankruptcy will harm your credit rating, although you can start rebuilding it immediately. Some lenders may consider you too much of a risk to approve a car loan. Yet, some companies act with more leniency in exchange for placing stricter conditions or higher interest rates on the agreement.
The bigger a deposit you can save before applying for a car loan, the more likely you will find a willing lender. Another option is to buy a second-hand car is another option. While driving a new car is nice, they depreciate when they leave the showroom, so it may not make financial sense.
Bankruptcy courts have some flexibility. Seeking help to explain the necessity of a car for transport or work could help you retain the one you have.