There’s a big difference between a discharge and a dismissal when it comes to bankruptcy. Having a dismissed bankruptcy on your credit reports can make it difficult to get auto loan financing, so you might have to explore alternative car buying options.
What a Dismissed Bankruptcy Means
A dismissal in bankruptcy means that you haven't completed the process for one reason or another. There are two different ways that a bankruptcy can be dismissed: with prejudice or without prejudice.
If your bankruptcy was dismissed without prejudice, it usually means you submitted something wrong or forgot to send something – usually a clerical error or a missed item when filing your bankruptcy. If this has happened, you can usually refile right away with the mistake fixed, and continue with the bankruptcy.
However, if your bankruptcy was dismissed with prejudice, it means that something went wrong. Some examples of a bankruptcy being dismissed with prejudice include:
- Committing fraud, hiding assets, or lying on your bankruptcy reports.
- Filing bankruptcy numerous times to delay or hinder your creditors.
- Disobeying a court’s order.
- Abusing the bankruptcy process.
When your bankruptcy is dismissed for any of the above reasons, it’s going to be difficult to get financing from an auto lender. Depending on how and when you originally filed for bankruptcy, the dismissal could stay on your credit reports for up to 10 years after the date you filed.
A dismissal with prejudice could mean that you’re most likely going to need to work with a buy here pay here (BHPH) dealership.
Alternative Car Buying Options
Since a bankruptcy dismissal with prejudice isn’t likely to fly with most lenders, checking out a BHPH dealer that uses in-house financing could be your best bet.
In-house financing simply means that all car shopping and lending is done at the dealership, by the dealer. The dealerships only sell used vehicles, but it’s usually a quick process because the dealer is the lender.
The biggest advantage of finding a BHPH dealership is that they don’t normally care what’s on your credit reports because they aren’t likely to review them. They do, however, verify your income, your identity, and require a down payment for you to be considered for an auto loan approval.
The income requirements vary greatly depending on the dealer you're working with and the selling price of the car you’re looking to purchase. However, the down payment requirement could be around 20% of the vehicle’s selling price.
Additionally, a BHPH auto loan may not be reported to the credit bureaus, which means your on-time payments wouldn’t help improve your credit score. Missed or late payments are typically reported, however.
While working with a BHPH dealership isn’t the best option for credit repair after a dismissed bankruptcy, just know that negative marks have less of an influence on your credit over time. Keep in mind that it could be on your credit reports for years, but not forever. A BHPH car loan could be a solution for the time being, so you can get into the transportation you need while you wait for the bankruptcy dismissal to drop off.
Ready to Get Back on the Road?
If your bankruptcy was dismissed, or even successfully discharged, it becomes a hassle to find the financing you need for your next auto loan. We want to help with that! Here at Auto Credit Express, we have a nationwide network of dealers that are signed up to work with bad credit car lenders.
To start our search of a dealership in your area that has the lending options for your credit situation, fill out our free, no-obligation auto loan request form.