Can I get car finance while in bankruptcy?

Bankruptcy is a legal status a person can take if they become unable to pay the debts they owe. It may cause serious problems if they try to get any type of finance, including car finance.

As soon as you become bankrupt, your details become available for any lender to see on the IIR (Individual Insolvency Register). Usually, you possess this status for one year, and after it’s over, you’ll receive a letter stating you’re a “discharged bankrupt” now.

If your bankruptcy was finished at least 12 months ago, and you’re paying your current bills right on time, you can definitely apply for any type of financial help, such as car finance.

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

In the UK, if you have your own car or you’re currently financing one, a decision will be made as to whether your vehicle is essential to you or your family. If the official receiver handling your bankruptcy decides that you or a member of your household needs the car for work, education, or a reason related to disabilities, you might be allowed to keep it.

Please keep in mind that “essential” does not equal “convenient.” If you live far enough from any public transportation lines, you certainly will need a car to get to work. But if a bus stop is right behind the corner, or booking a taxi ride is easy in your neighbourhood, you better not expect that you’ll be allowed to keep your vehicle once you’re bankrupt.

How bankruptcy affects your credit report

There are different levels of bankruptcy you can file for, which can have serious consequences for your credit report for up to ten years. Declaring yourself bankrupt will significantly lower your credit score, and that’s what lenders will base on when determining whether you qualify for finance.

Nevertheless, even with a damaged rating, you should not abandon the idea of getting a car loan. Interestingly enough, credit providers often offer bad credit car finance for bankrupt people, as it may help those with a low credit score rebuild their rating. Taking responsibility to handle your new credit adequately will help gradually improve your score.

Here are some other ways that could help you improve your bad credit history:

  • Using a credit card regularly and paying it back on time every month
  • Making your payments and paying bills on time
  • Avoiding making too many loan applications in a short period of time
  • Fixing any mistakes on your credit file

Can I buy a car while in bankruptcy

If you’re bankrupt, purchasing a car is nearly impossible. Obviously, lenders understand the consequences of bankruptcy, so they will most likely not offer any bankrupt car finance for as long as you’re officially unable to pay the debts that you have.

You should remember that it’s not legal to get a loan in the amount of £500 or more without letting the lender know of your status. Besides, you must follow any other restrictions made by your receiver – otherwise, you may end up in court and have your discharge from bankruptcy suspended. Thus, your finances might remain under the receiver’s control for more than one year.

Why it’s hard to get car finance after bankruptcy

Once discharged from bankruptcy, the “black mark” will stay in your credit history for 6 more years (at least it’s true for the UK), and lenders will have access to your file if you apply for car finance. Some of them will certainly become concerned that you might not be able to make your payments on time, and your application will be rejected.

Nonetheless, people who used to be bankrupt can still get car finance. As mentioned before, lenders often find ways to provide you with a car loan, despite your financial difficulties in the past. However, be prepared that your interest rates might be higher due to the higher level of risk the lender is taking on.

With a bad credit rating, you may also be asked to put down a higher initial deposit. This will also increase your chances of getting finance since a high initial deposit reduces the total loan amount.

Carplus reviews

Need a hand?
We're ready to help


Alpha House, Regis Road, London, NW5 3EW


0203 389 7779


Business hours

Monday to Friday 8am - 8pm
Saturday to Sunday 9am - 6pm