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postheadericon Should I buy a car now? Car Purchases and bankruptcy

Car Purchases and Bankruptcy.

I have many clients who are in need of reliable transportation both before a bankruptcy and after a bankruptcy.  When is the best time to buy?  The answer, as always, depends on several factors.

 

Car Purchases and Bankruptcy – Chapter 7.

If you are considering Chapter 7, the decision to wait to buy a car is much easier.  Since a Chapter 7 Bankruptcy case is only 3 or 4 months long, you can usually wait for the bankruptcy discharge to help you get a better financing deal.  If you buy a car before you file bankruptcy, you may get a poor interest rate because of your outstanding debts.  If you agree to purchase a car at 25% interest, you will be stuck with that interest rate unless the lender agrees to lower it later.  If you buy the car after your bankruptcy discharge, a lender may see you as a better risk, and give you better borrowing terms.

 

Car Purchases and Bankruptcy – Chapter 13.

With a Chapter 13 bankruptcy, the analysis is more complicated.  You are entering a 3 to 5 year repayment of your debt.  If you buy a car before you file, you may be stuck with the high interest loan you agreed to.  If you buy it after you file and during the case, you have to find a lender that will lend while you are in bankruptcy, and you have to get court permission.

If you know you have to file for Chapter 13 bankruptcy, you will already be planning for the next 3 or 5 years you’ll be in the case.  You may decide that now is the time to buy a new car.  When you buy that car BEFORE the case is filed, the lender will hit you with a high interest rate because of your poor credit.  If you file your bankruptcy a month later, the U.S. Supreme Court has said that you cannot force the lender to lower the rate on a purchase that recent.  So, you are probably stuck with a bad interest rate.

If you file first and then try to buy a car, you have to jump through some hoops.  Many lenders will not want to lend to you while you are in bankruptcy.  However, I have a list of some that will.  You will also have to obtain a court order.  You have to show the bankruptcy court that you can afford the payments and that the car purchases is necessary.  It is not an overnight process, so if time is critical, it can be a frustrating one.  However, I have successfully gotten many car purchases approved by the court.

Fraud?

Is it fraud to buy a car and then file bankruptcy?  Most people filing bankruptcy understand the concept of fraud.  If you incur a debt on the eve of a bankruptcy filing, the creditor can object to a discharge of that debt.  The analysis is, of course, much more complicated than that.  But remember, you are not buying a new car with the hopes of discharging the debt and returning the car.  You are buying a car with the intention to keep it and pay.  That is not fraud.  If you are keeping the car and you pay it, the creditor will not be concerned.

As I tell all of my clients, don’t purchases a car JUST because you are filing bankruptcy.  If you need a new car – great.  If you don’t, then don’t buy one.  If you have questions, call me to discuss your pending car purchases and bankruptcy.

 

Please contact me today to discuss bankruptcy further.  314-827-4027.

Sean C. Paul, Attorney, discusses car purchases and bankruptcy

Sean C. Paul, Attorney, discusses car purchases and bankruptcy

Sean C. Paul is licensed to practice law in the State of Missouri. His practice is located in south St. Louis County. He can help you with your Chapter 7 or Chapter 13 Bankruptcy case.  If you are concerned about car purchases and bankruptcy, call me today.

Sean C. Paul will give you the individual attention you deserve. He will meet with you one-on-one to determine how he can help you. If you are considering filing bankruptcy in Missouri, please call today.

Sean C. Paul, Attorney at Law Google+ Profile.

Sean C. Paul, Attorney at Law
8917 Gravois Rd. St. LouisMO63123 USA 
 • 314-827-4027

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