Can I still get car finance if I’ve been made bankrupt?

Bankruptcy can be difficult, and at Zuto we know people can experience bankruptcy for lots of different reasons. When you declare bankruptcy, nearly all of your unsecured debts will be written off, and your creditors can’t take any legal action against you to recover your debts – so you can focus on a fresh start.

Declaring bankruptcy can have serious implications, so it’s a big financial decision – but if you’ve already been declared bankrupt, you might be planning for the future, and thinking about applying for car finance. The good news is that while being approved for car finance after bankruptcy can be difficult, it’s not impossible. Here’s everything you need to know.

Can you get a car on finance while bankrupt?

If you are currently bankrupt, it’s very unlikely that you will be able to get a car on finance. Lenders generally won’t offer car finance for bankrupt people while your case is with a receiver.

It’s also worth noting that it’s highly unlikely that you’ll be able to borrow any large sums of money while bankrupt – you can get a loan while bankrupt, but if you want to borrow any amount over £500 you’ll have to make the lender aware of your bankruptcy and you’ll usually, unfortunately, be declined.

However, once you’ve been discharged from your bankruptcy, the good news is that you can start to rebuild your credit rating and apply.

What happens to your car when you're declared bankrupt?

You will only be able to keep your current car if it is deemed essential to your current circumstances. Whether you own a car or have one on finance, your bankruptcy receiver will make the call as to whether you need the car, or if it’s considered a convenience.

Generally, you will only be able to keep your car if you or members of your household can’t access work or school without it, or have a disability and rely on a car. They will look at factors such as whether you can access public transport and taxi services when assessing how vital your car is to your daily life.

Car finance after bankruptcy

If your bankruptcy has ended and you’ve been discharged, you’re free to apply for car finance again.

Bankruptcy usually lasts for one year, and when it’s finished, you’ll receive a letter that states that you are now ‘a discharged bankrupt’.

There will be no legal limit on the amount you can borrow anymore, but you will likely find it harder to be accepted for credit, and your interest rates will likely be higher.

Don’t let this stop you from applying for ex-bankruptcy car finance, though. Some lenders specialise in bad credit car finance, and can provide you with options. Zuto work with a large panel of lenders who help thousands of customers with bad or poor credit get car finance, so you’ve come to the right place.

How does bankruptcy affect my credit score?

When you’re made bankrupt, your credit score will be impacted. Your credit score is what lenders will look at, amongst other financial factors, when evaluating your application for car finance – and bankruptcy will remain on your credit report for six years.

It’s usually best to wait at least 12 months before applying for credit again, and take steps to improve your credit score during this time.

How can I improve my credit score? 

The best thing you can do to increase your chances of getting car finance after bankruptcy is improve your credit score. Here are some immediate steps you can take:

• Try to use credit, such as a credit card, little and often and pay back on time each month
• Fix any mistakes on your credit report, as this could impact your score
• Make sure you are on the electoral roll so lenders can find your details when you apply for finance
• Avoid making multiple credit applications in a short space of time
• Pay your bills on time

If you’re applying for car finance after bankruptcy, at Zuto, your credit score won’t be impacted. We do what’s known as a ‘soft search’, which won’t leave a mark on your credit file.

Once you apply, we will search our large panel of lenders to try and find you the best car finance we can, based on your personal circumstances.

If you’re approved with one of our lenders for discharged bankrupt car finance, our specialist team will be in contact to discuss the details of the finance offer; only if you’re happy, it’s at that point a hard search will appear on your credit file. For even more help and advice, get in touch with our team of experts today.

Mike has worked at Zuto since 2018 and uses his experience within the industry to help customers understand the ins and outs of car finance.