Some people in Kentucky who are in the midst of a Chapter 13 bankruptcy might wonder whether they can obtain an auto loan. It is possible to do this, but it may take time because it is necessary to first get court approval.

The biggest hurdle may be finding a lender and a dealer who can work with someone in the process of bankruptcy. If a bank or credit union is unwilling to offer financing, a person may want to look into a subprime dealership because bad credit financing is their specialty. The next step is to choose a vehicle and agree on the terms of the loan. The dealer then must write up a buyer’s order.

This order must be taken to the bankruptcy trustee. The person will need to complete paperwork explaining the need for the vehicle. A trustee is unlikely to approve a luxury vehicle, so it is better to choose a modest one. The trustee then files a Motion to Incur Additional Debt. This must go to the court and to creditors. After approval, an Order to Incur Additional Debt is provided by the court for the debtor to take to the lender. If the request is rejected, the person can try with a different vehicle or apply again later in the bankruptcy process.

A Chapter 13 bankruptcy is generally for a person who has an income above a certain level and who can afford to make regular payments. It involves working out a repayment plan with creditors over a period of three to five years. Filing for bankruptcy automatically stops any creditor actions ranging from harassment to court cases, foreclosures and more. A Chapter 13 bankruptcy might be a way for a person to keep an asset such as a home while making a fresh financial start.