If you are wondering, "Can I get a loan while in chapter 7?" you will want to read further. In most cases the answer to this question is yes. However, I must follow this with the comment that this is a bit tricky so you will want to work closely with your bankruptcy attorney to be sure that you do not delay or disrupt the bankruptcy in any way.
First of all let's begin by explaining a little about a chapter 7 bankruptcy. The process of a chapter 7 bankruptcy is the complete discharge of unsecured debts. It can also be referred to as a "liquidation" bankruptcy. This process will release you from debts such as credit cards, personal loans and medical bills.
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You will work with an attorney who will draw up the papers which will be filed in the court system. Once the filing has entered the court, you will be assigned an estate trustee. This trustee will be important to you if you want to get a loan while in chapter 7. They are your go-to team for any financial questions as you work through the bankruptcy process.
As far as an auto loan goes, you will have the chance to reaffirm the loan so that you can keep your vehicle. However depending on your situation, this may not be the best decision for you and your car loan. If you find that you are upside down on the car loan (where you owe more money than what you car is worth), you may want to speak with your attorney about letting them repossess it and get a new car loan. It may be to your advantage to do this, but you do want the advice of your bankruptcy team to be sure that you can get another vehicle to replace the one that will be repossessed.
In addition, your bankruptcy team should be familiar with your complete financial portfolio so they have a pretty good idea of what you can and can't do legally. They may also advise you as to what you can comfortably handle for a monthly payment for a car loan during chapter 7.
If the attorney and the trustee feel that you will be able to get a loan, the trustee will have to write up a letter of permission and present it with your court filing. In addition you will need this letter to give to potential auto lenders.
You will want to find an auto dealer or an auto consultant that offers programs for people who are in a bankruptcy. Not all dealers offer this service so you may have to check around for someone in your area who works with people in Chapter 7 bankruptcies.
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