Yes, you can buy a new (to you) car while your Chapter 7 bankruptcy case is pending. If possible, wait until your discharge has been granted as that will give you more negotiating power with the bank. At that point, the bank will know that you have no (or almost no) debt to deal with and that you can’t file Chapter 7 bankruptcy again for at least 8 years. Combine that with the fact that you’re likely looking to rebuild your credit (paying even closer attention to making timely payments than before), and you should have no problem getting approved for a loan.
Keep in mind, however, that you’ll likely get stuck with a pretty high interest rate. Since this is a post-petition debt that your discharge will not eliminate, only take out a loan that you know you can afford to pay every month. Otherwise, you’ll end up in a difficult financial situation all over again.
Refinancing your car during Chapter 7 bankruptcy
Your best option for “refinancing” your car loan to get better payment terms while your Chapter 7 bankruptcy is pending is to do either a reaffirmation of your current loan or redeeming the car with a new loan.
It doesn’t always work, but if you’re reaffirming your car loan, ask the lender for concessions in the form of lower interest rates or maybe a reduction of the amount owed. The bankruptcy court is typically much more likely to approve a reaffirmation agreement where such a concession has been made. It’s totally ok to mention this to them during your negotiations.
The other form of “refinance” for your car loan in a Chapter 7 bankruptcy is through a redemption. When you redeem your car in bankruptcy, you essentially buy it for its current fair market value - not what is still left owing on the loan. Taking out a new loan to redeem a vehicle is a form of refinance but with the added bonus that the loan amount will no longer be greater than the value of the car.
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