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Leasing a Car After Bankruptcy

A man wearing a suit buckles into his new car, which he leased after emerging from bankruptcy protection.

Bankruptcy may sound scary, but it can be a useful tool to move on with your life after financial difficulties. Bankruptcy does, however, stay on your record and may have implications for your lending options down the road. One common activity you may be wondering about is leasing a car after bankruptcy.

How long do you have to wait after bankruptcy? Are you even able to do it? The short answer is generally, yes, you can lease a car and engage in any other life event after bankruptcy — but there may be conditions attached that don’t apply to other people. There is no required waiting period, although taking time to improve your finances first lets you borrow on better terms.

A Bit About Bankruptcy

One thing to remember about leasing a car after bankruptcy is that it depends on what chapter of the bankruptcy code your proceedings fell under. For individuals,Chapter 7 and Chapter 13 are the most common types of bankruptcies.

Chapter 7 bankruptcies, known as liquidations, are shorter proceedings which “wipe clean” many types of debt. They last four to six months on average and you’re able to start borrowing again when you’re discharged.

Chapter 13 bankruptcies, known as reorganizations, are longer processes and aim to get individuals caught up on loan payments rather than wiping the debt clean. These payment plans can last roughly three to five years.

Although Chapter 7 bankruptcies don’t take as long to complete, they stay on your credit report for a longer period of time than a Chapter 13 filing. While you’re still able to borrow with a bankruptcy on your credit report, the terms will be less favorable.

You also must wait until your bankruptcy is “discharged” before you are free to borrow money again. A discharge is simply the official end of the bankruptcy proceedings, a signal that you’re free to move forward.

Factors Considered When Borrowing Money After Bankruptcy

A lender considers the following factors when deciding what it will take for you to lease a car after bankruptcy:

Credit Score

A bankruptcy will lower your credit score, sometimes severely. The lower your credit score is, the fewer options you have for borrowing money or qualifying for expensive vehicles. Take steps to rebuild your credit score before leasing a car after bankruptcy, if possible. Keep in mind it takes some time for your credit score to update when changes have been made. Dispute any errors you think are on your report with the credit reporting agency.

If you can save enough money to pay cash for a vehicle, which may take some time, you can usually bypass the significance of a credit score and the lending process altogether.


The higher your income is, the more likely a lender will be willing to work with you. Some experts suggest spending no more than 10% of your income on transportation. This means for a $20,000 car loan with payments of $438 per month, an income of at least $52,560 per year ($438 x 12 months x 10) would be preferred for favorable loan terms.

Down Payment

If you can save money and make a large down payment on a vehicle, a lender will be more willing to work with you. Some may even require a down payment as a condition to borrowing.

Automobile Company

The size of the company from which you are purchasing or leasing a car matters, too. Bigger companies can afford to take on riskier clients, so you may want to try to work with a larger company. You will still face higher rates and other unfavorable conditions compared to borrowers without bankruptcy on file, but you should still be able to get a car.

Tips for Leasing a Car After Bankruptcy

1. Wait As Long As You Can

Give yourself as much time as you can to build your credit score, save money for any necessary down payments, and take other measures to improve your finances after bankruptcy. Taking time before borrowing again will encourage lenders to work with you.

2. Improve Your Credit Score

As stated above, improving your credit score will encourage lenders to work with you. You can improve your credit score by:

  • Paying down your credit card balance every month
  • Creating a budget and getting rid of unnecessary expenses, which can add up
  • Saving as much money as possible
  • Seeing if you can become a user on someone else’s credit card rather than signing up for your own after bankruptcy
  • Using a low- or no-fee credit card

3. Do Your Research

Not all lenders will treat you equally — some will be willing to offer better terms than others. Ask them what factors they consider most important and how you may improve your chances of securing favorable loan terms. Know the signs of predatory lending and avoid getting roped into further financial trouble.

4. Set a Budget

Look at a month’s worth of income and determine what you can reasonably afford in terms of a car payment and other monthly expenses. Get rid of any unnecessary monthly expenses to allow yourself to save money.

5. Consider Your Alternatives

Do you need to lease a new car? Consider saving money to purchase a used car instead. Or, consider assuming another person’s car lease rather than starting your own. Assumption of a lease may give you more favorable interest rates and may be for a shorter amount of time than a new lease.

Considering Leasing a Car After Bankruptcy?

Beginning a car lease process after a bankruptcy discharge is possible, but it requires research. Consider seeking the advice of a bankruptcy attorney who can assess your situation and set you up for success.


This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

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