No matter if you’re going through a Chapter 13 or Chapter 7 bankruptcy, you may be wondering what the terms “dismissed” and “discharged” mean. Don’t get the two confused – they have vastly different meanings. A dismissed bankruptcy means the case was closed by the court before it was finished, while a discharged bankruptcy means it was completed successfully.
Dismissed vs. Discharged Bankruptcy
Now that you know the basic meaning of the two terms, let’s dig a little deeper into them. While we’re not lawyers and can’t give legal advice, we can explain what these terms mean and how you can get a car loan once your bankruptcy is over.
A bankruptcy is discharged when it is completed successfully. It means your debts have been wiped out. This is the most favorable outcome in the eyes of future auto lenders, since it shows that you were serious about the process.
On the other hand, a bankruptcy is dismissed when the case is thrown out before it's complete. Of course, this is a much less favorable outcome in the eyes of future lenders.
According to the legal experts at Nolo.com, a bankruptcy can be dismissed with or without prejudice.
- A bankruptcy that's dismissed with prejudice could be the result of disobeyed court orders, bankruptcy fraud, or abuse of the process – to name a few. Legal action may be taken if the prejudice is severe.
- A bankruptcy that's dismissed without prejudice typically means you or your lawyer made a mistake during the filling process. Luckily, you can fix any mistakes that caused the dismissal and refile immediately.
Can I Get a Car Loan after a Bankruptcy Dismissal?
If you went through bankruptcy and it was dismissed, can you get a car loan? It’s still possible to get an auto loan after a bankruptcy dismissal, but you need to work with the right lender.
You could try to get pre-approved with your personal bank or credit union, but you more than likely are going to be turned down. These places often make decisions based solely on credit. Instead, you stand a better chance of getting approved if you apply with a subprime lender or buy here pay here (BHPH) dealer.
Subprime lenders specialize in working with borrowers dealing with unique credit situations. They offer loans indirectly through their special finance dealership partners.
Subprime lenders do use your credit to qualify you, so they're going to see the bankruptcy and consider it when making a decision. While it’s possible they may approve you, they'll likely turn you down if your credit reports show a dismissed bankruptcy.
If you get turned down by a subprime lender, a BHPH dealer is an alternative. These dealerships offer loans in-house, which means they’re also lenders. You can get a car loan after a bankruptcy dismissal at one of these dealers because they typically don't check your credit score or credit reports.
To get approved, you simply need to make a qualifying income. Be aware, however, that you don’t always get a chance to improve your credit score over time with one of these auto loans – some BHPH dealerships don’t report loans or timely payments to the credit bureaus.
However, more and more of these places are reporting in this day and age. We recommend that you ask them about their reporting practices up front to find out.
Looking for a Bankruptcy Auto Loan?
If you’ve recently had a bankruptcy dismissed or discharged and are looking for your next car loan, The Car Connection is here to help. We work with a nationwide network of dealers that know how to handle various credit situations, including bankruptcy.
Complete our free and easy auto loan request form, and we’ll get right to work connecting you to a local dealership.