bancruptcyBankruptcy is a very hard decision to make. What leads up to it is one of the most difficult phases people will go through in their lifetime. It is a desperate grasp at the last straw that is available to them. The last thing you would think about in this situation is going even deeper into debt by financing a car. But that is exactly the intelligent thing to do for many reasons. Here is why.

Getting a Good Interest Rate
You are going to need another car at some point after the bankruptcy while your credit history heals. Getting a loan before the wall crumbles will allow you to get the best financing, by far, that will be available to you for the next 7 years. It is a valuable window to you and you should seize the opportunity to secure that loan. Once the bankruptcy is on your record you will have a very hard time getting a car loan, much less an interest rate that can remotely match what you can get before the bankruptcy goes through the courts.

Re-establishing Your Credit
Once you declare bankruptcy your credit is shot for a good long time. However, if you already have a car loan, and you continue making those payments (even though all your other debt gets wiped clean) you are positioning yourself to quickly re-establish your credit. Instantly you are doing exactly what is necessary to repair the damage bankruptcy brings. You will be making monthly installments on the car which, in the minds of the credit bureau, escalates your credit score quicker than anything else.

You Will Have a Good Car
Remember that a car is one of the things in life that most people actually finance. You can live without credit cards, but in order to get a decent car that will last you 5-7 years you will need to spend $15-$18k, and if you are ready to declare bankruptcy you do not have that cash available to you. You will have a car that will take you through the ensuing years that will serve you well as you recover from the process. It will be one of the bright spots as you move forward.

Side Note
The banks are looking for assets when you declare. If you own a very nice car at the time of bankruptcy you might consider trading it in and assume a loan on another car where you have very little equity position on the new car. The banks will seize your assets but they will not mess with your car that you still owe on. Talk with your lawyer about this amount as different states have different restrictions. The banks regard a car as an asset unless you have a loan. If you owe most of what the car is worth it is a liability and they will allow you to keep it.

Greg Macke- Your Car Angel

Greg 252px aGreg Macke is a car blogger and author of “My 7 Secrets to Buying a High Quality Used Car”. He is a professional car buyer and consumer advocate working closely in the industry to improve the buyer’s experience. His high quality car buying tutorials offer help to the car buying public. – See more at:

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