PHOENIX — As declining sales and a tightening credit market continue to create a difficult environment for automotive retail, OnlineBKmanager.com's Robert Davies believes that tapping into an expanding discharged bankruptcy market may offer relief to subprime dealers.

"I have been frustrated with all the negative press in the subprime industry lately," Davies, the company's president, told Special Finance. "We're seeing positive reports from within our segment on a daily basis. According to our sources, fresh BK automotive lending is strong, and those portfolios continue to perform well for dealers and lenders."

Davies cited statistics from the American Bankruptcy Institute, which recently reported that U.S. bankruptcies are at a three-year high. In October, according to the Institute, more than 100,000 Americans filed for bankruptcy, and more than 65,000 were discharged. Although the buying pool represented by those figures is credit-challenged, Davies and subprime lender Tidewater Motor Credit's Dedra Muffley agree that, historically, loans made to recently discharged customers have performed well.

“We have been booking fresh BK deals since the year 2000, and they are by far our best-performing loans,” Muffley said. “We are looking to do away with the non-bankruptcy paper or customers who look like they are on their way down. We want the customers whose problems are behind them."