From Car Loan Wiki

Bankruptcy is when the borrower legally states they are unable to pay their debts to their lenders, offering the borrower a "clean slate" of sorts. This is done by the borrower filing a petition with the government. In the United States there are several types of bankruptcy, most commonly, Chapter 7 and Chapter 13. Obtaining an auto loan with one of these types of bankruptcies can sometimes be difficult, but not impossible. Today, lenders rarely approve auto loans if the borrower has an open bankruptcy. If the lender does approve the loan it must then be approved by the court. The reason for this is so that the new auto loan will not be included in the bankruptcy. If you haven't filed for bankruptcy yet but are planning to, and you know you'll need an auto loan, you can improve your chances of getting approved with a Chapter 7 bankruptcy, rather than a Chapter 13. In either case a bankruptcy can stay on your Credit Report for up to 10 years, and can seriously affect the decisions of future lenders. So before you file for bankruptcy, you should seriously consider the risks and the consequences, and decide if a bankruptcy is the best option for you.

Types of Bankruptcy

Chapter 7

Chapter 7 bankruptcy is a liquidation bankruptcy. This means that if you file for chapter 7 bankruptcy all your unprotected assets are liquidated, or sold, to pay off the debts to your creditors. Basically this means the government will step in and manage your assets to help pay off those you owe. Chapter 7 is the most commonly used bankruptcy in the U.S. and also the most commonly abused. This abuse has caused stricter guidelines of bankruptcy laws, such as the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.

Chapter 13

Chapter 13 bankruptcy is a reorganization bankruptcy. This "reorganization" means that the government offers the debtor some relief from their debts as long as they follow the courts instructions on paying this debt off over a period of several years. You must have an income to file for Chapter 13 bankruptcy, as it is a plan to dedicate part of this income to paying off your debts.