A bankruptcy stays on your credit report for years, but it does not rule out leasing. Some lenders will lease to people after a bankruptcy, subject to their criteria, and the terms tend to improve the further you are from it.
This is part of our guide to leasing a car for the first time. If your credit has other issues, leasing a car with bad credit covers the wider picture.
Chapter 7 and Chapter 13 are different
Chapter 7 wipes out most unsecured debt, usually within a few months. Once it is discharged, you can apply for credit on your own. Some lenders will consider an application soon after discharge, while others want to see a period of rebuilt credit first.
Chapter 13 is a repayment plan that typically runs three to five years. While you are in it, taking on new debt, including a lease, usually requires permission from your bankruptcy trustee or the court. Talk to your attorney before you apply for anything.
In both cases, your lease options depend on the lender and on what your credit looks like since the bankruptcy.
What lenders look at
Time since discharge. The more time that has passed, the more options you have.
What you have done since. On-time payments on anything opened after the bankruptcy, such as a secured card, are the strongest evidence you can offer.
Income and stability. Steady income, time at your job, and time at your address. See documents needed to lease a car.
Your current debt load. Lenders will look at what you owe now against what you earn.
The car. A modest car with a sensible payment is easier to approve than an expensive one.
What to expect on terms
Being realistic up front saves disappointment:
- A higher money factor than someone with strong credit. See money factor on a car lease.
- A request for more money at signing, or a security deposit.
- Limits on the car or the approval amount.
- Possibly a co-signer. See co-signers on a car lease.
Be cautious of any offer that seems to ignore your history entirely. Every lease is subject to lender approval, and a legitimate lender will review your credit.
How to prepare
1. Get your discharge papers. Lenders may ask for proof that the bankruptcy is discharged or, for Chapter 13, for trustee approval.
2. Check your credit reports. Make sure debts included in the bankruptcy are reported as discharged, with a zero balance. Errors here are common, and they hurt. Dispute anything wrong before you apply.
3. Rebuild some history. A secured card used lightly and paid in full each month, or a credit builder loan. See improve credit before leasing a car.
4. Keep the payment modest. A lease you can pay comfortably, on time, every month, is what rebuilds your credit fastest. See does leasing a car build credit.
5. Apply selectively. Several applications in a short window add hard inquiries. A broker can help identify lenders likely to consider your file before anything is submitted.
Leasing versus financing after bankruptcy
Some people find financing a used car easier to get approved for after a bankruptcy than a new car lease, and some find the reverse. It depends on the lender and the car. It is worth pricing both. See lease vs finance a car.
The short version
Leasing after bankruptcy is possible with some lenders, subject to approval. Chapter 7 usually means waiting until discharge; Chapter 13 usually means getting trustee approval. Expect higher rates at first, and expect them to improve as you rebuild.
If you want an honest read on where your file stands, get in touch.
