Bankruptcy and car repo problems seem to be intertwined. Once a bankruptcy petition is filed, the automatic stay prevents a car company from seizing your car. But, if the car has already been repossessed before the bankruptcy was official, some of the options I discussed in yesterday’s bankruptcy blog (see “The Three R’s Of Car Repo’s: Renegotiate, Redeem, Reaffirm”) are simply not going to be available. The fact that it’s going to be very difficult to get back into a car loan while the bankruptcy proceedings are going on is one of the reasons I wish more people would seek my advice at an earlier stage of their problems. I would have advised putting car payments at the top of their to-be-paid pile of bills, even if that meant leaving some other bills unpaid.

Many newly bankrupt consumers believe they’ll need to pay 18% or even greater interest on any car loan. But, at least for consumers whose bankruptcy is more than one year old, credit unions offer excellent rates, and that’s what Paula Langguth Ryan, author of Bounce Back From Bankruptcy suggests would be the best thing to do. A second alternative might be a bank, not, as you might expect, a dealer’s finance department.

What I always suggest is, when you visit a car dealer, bring along a copy of your own credit report. That way, as you shop in different places, you won’t have several different potential lenders all making inquiries with the credit bureaus. Of course, you can call the dealer ahead of time and ask what their minimum credit score requirement is to get approved for a loan. Then, there are actually auto lease packages specifically designed for this situation, called, aptly enough, “bankruptcy auto loans“. Since these loans are typically fixed for three years, more money goes towards the principal of the loan and the lender still remains in a good position.

One common-sense tip I always offer my clients who are rebuilding their financial lives after bankruptcy is to drive used cars. That way, I say, you’re not being hit with expensive depreciation that happens during the first couple of years in the life of a new car. After all, this is your new financial life we’re talking about!