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Tips for keeping or buying a car during bankruptcy

People in Virginia who are considering filing for bankruptcy might be wondering whether or not it will affect their ability to purchase or keep a car. In a Chapter 13 bankruptcy, a person's debts are restructured to allow the person to keep some assets and pay creditors over three to five years. A person's car is usually among the assets kept although there are a few exceptions.

The court might consider payments on a luxury car too expensive. The payments might not be considered a reasonable expense, or they might be so high they disrupt the payment schedule. If a person has fallen behind on payments, there will be a temporary stay on repossession or other actions when the person files bankruptcy, but the person may be required to catch up and then make back payments.

If a person wants to buy a car during bankruptcy, it will be necessary to find a dealer who will work with someone who is in bankruptcy. The trustee and the court must then approve the loan. Considerations will include whether the person needs the car and how the payments will affect the person's repayment plan.

After bankruptcy, despite a lower credit score, a person can probably get financing. They might need a 10 percent down payment and be subject to higher interest rates.

A person who is struggling with debt might want to discuss options with an attorney. One advantage of filing for bankruptcy is that it will immediately stop creditor harassment and put an end to foreclosure or legal action against a debtor. While bankruptcy does affect a person's credit, ongoing debt and unpaid bills do as well, and after bankruptcy, a person can start rebuilding credit. An attorney may be able to assist in preparing all the paperwork needed for bankruptcy since it is important that this be done accurately to avoid delays.

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