The down payment needed on a bankruptcy auto loan depends on many factors.

Previous Credit

If you are on this website, you probably have had a bankruptcy. “Previous Credit” means the years leading up to your bankruptcy. Have you had auto loans or mortgages you have paid well? Auto lenders are most concerned with how you have paid installment loans, like auto loans. Credit cards and other revolving accounts are less significant in determining your auto loan tier.

Income

Are you a W-2 Employee, or 1099/Self Employed? The answer matters…a lot! Most of the $0 down bankruptcy auto loan programs are tied to the applicant having W-2 income. Additionally, your Debt-to-Income ratio will play a major factor.

Debt

Your Debt-to-Income (DTI) ratio can make or break your auto loan. If you cannot afford the new auto loan, why would a bank give you a loan? Add up all of your monthly income, before taxes, then divide that number by 2. Next, subtract all of your current monthly debt (rent, loans, child support, etc…not utilities/bills). The difference is what most lenders will determine you have left over for your new auto loan payment.

Each lender uses a combination of your Previous Credit, your Income, and your Debt to determine if you will qualify at all, and at what tier in their system. Based on how you score to the bankruptcy auto lender, the lender will usually determine what your minimum down payment and interest rate will be.

At AutoLoanBankruptcy.com, we have bankruptcy auto loan programs that even allow people to get an auto loan with $0 down. Not everyone will qualify, but many do.

Yes. But time is of the essence.

Keep in mind, we are not attorneys, so you should probably talk to yours about this, but…Typically, the rule is that you have 60-days after your signed reaffirmation agreement is filed with the court. If you filed a bankruptcy without an attorney (pro se) the judge also needs to sign the reaffirmation agreement. Typically, if you have an attorney and they sign the reaffirmation agreement, as well as you (the filer), and the creditor, the judge does not need to sign it.

When in doubt, do not reaffirm. Redeem Your Auto Loan.

The decision to reaffirm any debt in your bankruptcy is very serious and should not be taken lightly. There are several factors that should go into your decision whether or not to reaffirm an auto loan in your bankruptcy:

1. Do I have any equity in the vehicle?

If you owe more money on your car than you can sell it for, or trade it in for, then why would you want to take financial responsibility for the loan after your bankruptcy? We often see people who unknowingly reaffirm their auto loan with $8,000 negative equity or more. If you have that kind of negative equity, and you reaffirm, you are going to have that vehicle for a very long time…unless you decide to use $6,000-$8,000 cash for down payment on your next car. Needless to say, reaffirming your current auto with negative equity is a bad idea. Bankruptcy exists so that you can get out from under debts like an upside down auto loan.

2. Can you get approved for a new auto loan?

Due to life changing events, sometimes you might not be able to buy a vehicle right now. If you NEED a vehicle to get around, and you cannot get approved for a new loan, maybe you should reaffirm your car.  If you are concerned about getting approved for an auto loan after filing bankruptcy, you should apply at www.autoloanbankruptcy.com to find out your options.

3. Is your auto loan at a Credit Union?

Credit Unions use something called cross-collateralization which can make it tougher to discharge their debt into a bankruptcy. Basically, if you have other debts or assets with that Credit Union, they can group it all together. If you have a home loan, a car loan, a credit card, and a checking account with a Credit Union, you cannot decide to keep the house and the checking account, but let the car and credit card go in the bankruptcy. It is more of an “all or nothing” philosophy.  Just be sure to empty out your checking/savings at your Credit Union prior to filing bankruptcy if you are letting any of their accounts be put in your bankruptcy.

4. Can you afford the monthly auto loan payment?

If you have equity, you could get a new loan if you wanted to, you need to be able to afford the car payment, right? We see people reaffirm $500-$700/month payments that cannot afford them. Remember, your bankruptcy is your opportunity to set yourself up for success.