Timeline

• Chapter 7 bankruptcy is the quickest of all bankruptcies, lasting just three or four months. Most people in Chapter 7 don’t even consider taking on new credit during the bankruptcy, and it’s unlikely the court would allow it. However, another form of bankruptcy, Chapter 13, requires three to five years to complete because of a court-ordered payment plan to creditors. Bankruptcy courts do allow participants in Chapter 13 to take on new debt for certain purchases, but the debtor must ask permission.
  
  

Reasoning

• Bankruptcy courts realize it’s not reasonable to expect people to go without reliable transportation for up to five years. So the court allows a participant to seek car financing if the debtor shows he can afford the car payment and abide by the court-ordered payment plan.
  
  

Payments

• People completing bankruptcy shouldn’t count on buying a flashy new car. More likely, the trustee assigned to the case will allow car payments ranging from $200 to $250 a month, according to Bankrate. The court’s position is that a debtor who can afford to pay more should be sending the extra money to existing creditors rather than buying a nicer car.
  
  

Financing

• The other issue is finding a credit agency willing to approve the loan. Some car dealers specialize in lending to people with bad credit, and will likely approve people who are in bankruptcy. The downside is that they may charge exorbitant interest rates. They know traditional banks and credit unions are not going to approve credit for someone in the middle of bankruptcy, the debtor is possibly desperate for transportation, and such a customer could be a poor credit risk.