If you’ve been declared bankrupt, it can be a very stressful time. When it comes to bankrupt car financing, it can be harder to get a car on finance but it doesn’t have to e the end of the road. Our blog below looks at how being declared bankrupt affect your ability to get a car loan and also how to increase your chances of approval once you have been discharged from your bankruptcy agreement.
How do you go bankrupt?
Bankruptcy may be put in place when a person cannot afford to pay back the debts they owe. Instead, bankruptcy is a way to write off the money that you owe and helps to give you a fresh start. Going bankrupt shouldn’t be taken lightly though and should be a last resort. Being declared bankrupt have a massive impact on your financial life and the ability to borrow money in the future. You can choose to declare yourself bankrupt or your creditors could also choose to make you bankrupt. Find out more about bankruptcy and how it works.
What happens when you declare yourself bankrupt?
In order to write off all of your debts, all the assets you own will then become the property of your creditors. They have the right to share out your assets, such s your home and your car in order to get the money back they are owed. However, you can still continue to live in your home until it is sold. Creditors also won’t be able to take some goods from you such as household items like TVs or laptops. Once you are declared bankrupt, you can’t borrow anything over £500 without having to tell the lender that you are bankrupt. This information will also be recorded on your credit file and bankruptcy will stay on your credit report for six years.
How does bankruptcy affect car financing?
Car finance is all about risk and the likelihood that a lender will get their money back on time and in full. If you’re looking to finance a car whilst bankrupt, it can be hard as you usually can’t borrow over £500 without telling the lender. Once a lender is aware of your current financial situation, it is up to them to decide whether they would like to offer you finance or not. Bankruptcy will also have a massive impact on your credit score and will be visible on your credit file for six years. Some lenders may decline you for car finance but it could be possible to get a car on finance after bankruptcy. Whilst you are going through bankruptcy, it can be hard to get approved as any money you have is usually used to pay back your creditors instead.
Can you keep your car when you are declared bankrupt?
If your car is on finance or if you own the car, there are some conditions in which you may be able to keep your car. If you can’t do your job without your vehicle, if you or someone in your household needs it due to disability or if there’s no possible way you could get to work or school without it. However, even if public transport would be an inconvenient option for you, the creditor can still possession of your vehicle.
Can you keep a financed car when bankrupt?
If you already have a car on finance, you may be wondering if you can keep your car when you’ve gone bankrupt. The first step can be to contact your car finance lender to who you make repayments. This is because in many agreements there is a clause that states if you are declared bankrupt whilst you have a car on finance, you will need to return the car to the lender. Car finance agreements, such as hire purchase, are secure loans which mean the lender owns the car throughout the agreement. In some cases, you can continue to make payments to the lender and use the car if you can prove that you would not be able to do your job without it. If you are unsure of your options, you can speak with your lender. If you’ve had a car through us and aren’t sure who your current finance lender is, please drop us a message and we can help!
Can you get bankruptcy car finance?
It can be much harder to get a car on finance whilst bankrupt. In many cases, the rules of your bankruptcy agreement state that you can not take out any more loans or finance whilst bankrupt. Any money you do earn is usually put towards paying off your debts and can make it impossible to pay for your car finance agreement. We have a specialist panel of lenders which means we can help you find the most suitable finance deal for you. In some cases, we have been able to help people in bankruptcy to get a car but your options can be limited. Instead, it can be a better idea to wait until after you have been discharged from your agreement.
Financing a car after being discharged from bankruptcy
For many people, being discharged from your bankruptcy agreement is a massive relief. You can be discharged from bankruptcy after 12 months of getting the order. Once this has happened, any assets that you buy will now be yours and will not have to be used as collateral towards your debts. Once you have been discharged from bankruptcy, you can apply to get a car on finance. Your credit score will still be negatively impacted by bankruptcy though and can cause you to have bad credit. However, as a bad credit finance socialist, we can help people like you in similar situations. Find out more about our low-credit car finance options. In many cases, it can be a good idea to take some time to work on your credit score before you apply to get bankrupt car finance as it can improve your finances and the likelihood of receiving an approval.
How to increase your chances of getting a car after bankruptcy:
Whilst it can be possible to get approved for bankruptcy car financing, it is advised that before you do, you should take some time to put yourself in a better financial position first. It can be a good idea to wait before you take on any more credit and instead spend the time improving your score and saving money.
Check your credit report
When you apply for car finance, lenders will usually require you to undergo a credit check. We only use a soft search credit check when you apply with us which won’t harm your current credit score and won’t be recorded on your credit file either. It’s always a good idea to keep on top of your credit report as it’s a way to see what your lender will also be seeing when they perform a credit check. It’s really important that all the information on your report is accurate and up to date and matches the information you supply on your application. If you’ve recently been discharged from bankruptcy, it should also be updated on your credit file. If not, you can contact the credit referencing agency that provided your report to make any changes.
Avoid making multiple applications for credit
Even if you use a soft search credit check, it can be a good idea to slow down the rate of your finance applications. Not only can multiple applications in a short space of time can harm your credit score but it may also make you less favourable to lenders. This is because you are more likely o have already been refused car finance and seems like you are desperate for credit.
Keep on top of current repayments
One of the easiest and most effective ways to rebuild your credit score is to handle your current finances responsibly. Even after bankruptcy, you may still have some financial commitments that you need to meet. Make sure you pay any finance or credit you owe on time and in full to improve your score and to avoid ever going into bankruptcy again. remember, bankruptcy should never be taken lightly but if you do find yourself in a position where you’re discharged from bankruptcy, you should use this time to wipe the slate clean and build better money habits.