A Dealers Guide to Chapter 7 and Chapter 13 Automotive Bankruptcy Leads

Wes Crumby Article by Wes Crumby (@wescrumby | linkedin)

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There are several ways dealerships benefit from individuals filing for or having claimed bankruptcy. Customers that have recently filed or are in the process of doing so are some of the best leads for lenders and dealers. Here is what every dealership should know…

In a chapter 7 bankruptcy, the individual is allowed to keep certain exempt property. The value of property that can be claimed as exempt varies from state to state.  There are various types of debt that are not discharged. A chapter 7 bankruptcy stays on an individual’s credit report for 10 years from the date of filing the chapter 7 petition. The average chapter 7 bankruptcy takes approximately 90-120 days. There is a filing date, a 341 meeting (meeting of creditors) and a discharge date.

Chapter 13 bankruptcy allows individuals with reliable incomes to pay back their debts under protection and supervision of the court. Under chapter 13, the individual files a bankruptcy petition and a proposed payment plan with the U.S. Bankruptcy Court. An important feature of chapter 13 is that the individual is permitted to keep all assets while the plan is in effect and after they have completed it. The average chapter 13 bankruptcy is either a 3- or 5-year plan. The bankruptcy court determines this timeline depending on the amount that is required to be paid back as well as the income of the party filing the bankruptcy.

It is a common misconception that once you file for a bankruptcy, no bank will offer you automotive financing for 7-10 years. This is not true at all! People with bankruptcy are buyers in desperate need of both re-establishing and rehabilitating their credit. Purchasing an automobile is one of the best things that they can do to meet this goal. In turn, these buyers are willing to travel further than most buyers. These buyers are usually under the false impression that they will not be eligible for automotive financing until long after their discharge date. Presented with the ability to finance a new vehicle, they typically jump at the opportunity.

Every dealership should know that open bankruptcies are vital to building an ongoing customer pipeline! The advantage of targeting a bk lead early in the bankruptcy process is that dealers can begin to build a relationship with the client. By targeting these potential buyers early on, dealers have the ability to network with clients 90 days before discharge – throughout the entire process! As discharge nears, many clients become flooded with vehicle mailers from dealerships near and wide. Dealers that initiate a relationship prior to discharge, have an upper-hand in the sales process. Many of your competitors will overlook this opportunity.

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