My Bankruptcy was Dismissed, Can I Finance a Used Car?

Bankruptcy can be an attractive option for anyone who finds themselves deep in debt and unable to work their way out. That said, bankruptcy is also complex, and can come with its own set of issues. One thing many people don’t know is the difference between a discharge and dismissal—and it’s essential to understand.

The Difference Between Discharge and Dismissal

A discharge is typically what people are after when they file for bankruptcy. In a discharge, all debt listed under your Chapter 13 is deemed satisfied after you complete your plan, and it’s likely that creditors will not try and come after you. If they do, you can contact your attorney to deal with the creditor.

A dismissal results in voiding the bankruptcy and usually happens because of failure to complete the Chapter 13 plan, or because of procedural mistakes or there are complications in the case. (Dismissals can be with out prejudice, meaning it's either your fault, or simply a complication that causes the dismissal.) This means creditors can continue to come after you. In a dismissal, all money paid to the Chapter 13 may end up going toward penalties or interest and still leave you with large debt balances.

Note that dismissals can happen with Chapter 7 filing too, but is far less common. Often, when talking about bankruptcy dismissals, you’ll be talking about a Chapter 13 filing.

How a Dismissal Affects You and What You Should Do Next

A dismissal can leave you in a tight spot that affects your financial well-being. For starters, a dismissal will show up on your credit report, making you an unlikely candidate for lenders. It also means you’ll be dealing with the stress of creditors knocking at your door and trying to take legal action against you. However, before you panic, realize there are still steps you can take to try and improve your situation. They include:

• Work with your creditors – Instead of turning off your phone and hiding, deal with your creditors head on. Call them and talk about a payment plans or a debt management plan. Another way to reduce what you owe or pay things off more quickly is to negotiate a settlement.
• Refile for bankruptcy – Just because things didn’t work the first time doesn’t mean bankruptcy is out. Before you refile, make sure you know what caused the dismissal. Also, realize with a Chapter 7 dismissal, you won’t be able to refile for six months. However, with a Chapter 13, you can refile anytime.

Can you Purchase a Car After a Bankruptcy Dismissal?

Let’s say a dismissal occurred—what’s next? Your financial picture may look bleak. Even more frightening, you may be afraid you can’t get a vehicle; a necessity for many families or workers. You might wonder if there is any chance at all to get into a car, truck or SUV. The answer is yes, but it may take some work.

Right off the bat, you can pretty much assume that any major lender is going to decline your application. Even lenders that specialize in lending to people with poor credit are going to avoid you. Your best chance for financing a car is through in-house financing (or buy here, pay here dealerships). The key is going to be showing that you are worth the risk. Here are some things you can do to make that happen.

• Get started on dealing with your dismissal. If you haven’t made any attempts to work things out with creditors, it says that you still aren’t ready to improve your finances. Try and show the in-house financing team that you are in contact with creditors, or have a plan of action.
• Have a job. If you don’t have income, how will you pay for anything? Steady employment is even better. In this case, your job may become your credit. The best case scenario is when you can prove you’ve stayed with a job for a long time. It says you’re willing to be responsible and show up for your obligations.
• Be honest from the start. If you aren’t willing to share the ugly, when it does come out, a lender may be less likely to trust you. Share your situation the moment you walk in. That way, it shows you’re serious about working with them to make the transaction successful.

You may not get an auto loan right after a dismissal, but don’t give up hope. Do the legwork and if the answer is no, keep working until it is yes. A dismissal may feel like the end of the world, but it really isn’t, especially if you’re willing to do everything possible to tackle your finances and clean up your mess.