Post-Bankruptcy: Buying a Car to Rebuild Credit? - Westgate Law

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Post-Bankruptcy: Buying a Car to Rebuild Credit?

If you are planning to file, are currently filed or have recently filed for bankruptcy, you have probably spent some time worrying about how you will rebuild your credit post-bankruptcy. We were recently asked if purchasing a car to rebuild credit post-bankruptcy is a good idea.

There are a number of methods you can use to build your credit back to higher standards after bankruptcy. In regards to a car loan specifically, proceed with caution. Buying a car is a viable method, but so is obtaining a secured credit card or personal loan.

Of course, if you need a vehicle this will increase the likelihood that buying a car to build credit is a good idea. It’s also more likely to benefit you in your efforts to get back on stable financial footing post-bankruptcy if doing so would decrease your overall, short term costs, i.e. if your current vehicle requires regular, high priced repairs, etc. These scenarios make buying a car to rebuild your credit a good option. But purchasing a car SIMPLY to rebuild your credit – we would not recommend. It’s just unnecessary. If you don’t NEED to buy a new (or newer) vehicle, make sure to assess your financial situation clearly and do the option that will have the least negative impact on your finances. You don’t want to make taking advantage of your fresh financial start difficult by immediately throwing in a big payment.

In fact, high vehicle payments are one of the common reasons cited by people who end up filing for bankruptcy. Many feel they can easily afford the payment amount prior to purchase only to find out after the papers are signed the vehicle is home, that their budget doesn’t really accommodate the purchase. This often results in credit balances that increase drastically or just go unpaid because all the available cash is going towards the car loan.

It’s very important to take steps to rebuild your credit post-bankruptcy, but the most important thing every recent bankruptcy filer must do is to remember to keep emotion out of the decision making process. Approach the decision logically, calmly and as if you have all the time in the world. Don’t let anyone pressure you into a purchase. This is your financial future you’re holding in your hands. Treat it with care.

If you need additional information regarding rebuilding your credit post-bankruptcy, get in touch with Westgate Law. We are your southern California bankruptcy attorneys, ready to provide you with answers to all of your questions.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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