Bankruptcy Dismissed vs. Discharged: What’s the Difference?
Bankruptcy dismissal and discharge are two different actions that debtors often confuse. When a court discharges your bankruptcy, you have no liability over your debts and creditors can’t collect on them. On the other hand, you are still liable for your debts. You could therefore suffer other consequences if you have your bankruptcy voluntarily or involuntarily dismissed.
If you are considering bankruptcy and want to know what the difference is between dismissed vs. discharged, we can help. Contact a bankruptcy attorney at Allmand Law Firm, PLLC today for a free consultation.
What Is a Bankruptcy Discharge?
A judge may grant a discharge for qualifying unsecured debt after you meet all requirements set by the bankruptcy court. This means that you are not liable for your debts anymore. Once you eliminate your debt through discharge, creditors can no longer pursue you for payment. Your bankruptcy case is officially over.
In Chapter 7 bankruptcy, discharge means that unsecured debt is wiped off. This gives you a clean slate.
The court will grant a discharge in Chapter 13 bankruptcy when you complete your repayment plan on time. Unpaid qualifying debt may be discharged as well.
Obtaining a discharge may take several months for a Chapter 7 case. For Chapter 13, it could take anywhere between 3 and 5 years. Discharge takes longer for a Chapter 13 because in a Chapter 7, assets are liquidated to pay creditors. In a Chapter 13, you pay back your debts over several years in accordance with the Court-approved repayment plan.
What Is a Bankruptcy Dismissal?
A bankruptcy dismissal is an action that, in most cases, you want to avoid if you are looking to improve your financial situation. A dismissal closes your bankruptcy case before it is completed. So, if the court dismisses your bankruptcy case, you are still liable for your debts and creditors can resume collections against you.
Dismissals occur more frequently in a Chapter 13 than a Chapter 7 bankruptcy. In Chapter 13, the court could dismiss your case if you fail to make scheduled payments as part of the repayment plan.
You can voluntarily dismiss your Chapter 13 bankruptcy, but not a Chapter 7 bankruptcy. In either chapter, the court can dismiss your case without your consent if you:
- Did not complete pre and post-filing requirements, including credit counseling and financial management courses,
- Did not file proper paperwork correctly,
- Failed to provide information requested by the court, or
- Engaged in fraud by doing things like racking up massive credit card debt that you don’t intend to repay or transferring property to a relative right before filing for bankruptcy, or
- Provided false information about your finances, creditors or assets.
You may not be granted a discharge of debts if the court dismisses the case. Once your case is dismissed, the court could grant a creditor’s motion to lift any automatic stay, an order stopping a creditor from collecting debt during an ongoing bankruptcy case. So, dismissal could result in your creditor repossessing your car, foreclosing on your home, or demanding payment.
One thing you can do to make sure the court grants you a discharge and not a dismissal is to convert your Chapter 13 bankruptcy into a Chapter 7 before the court has a chance to dismiss your case. You should consult an experienced bankruptcy attorney about taking this action.
Refiling After Discharge
If you file for Chapter 7 bankruptcy and are granted a discharge, you can refile for bankruptcy in the future. But you will have to wait eight years for another Chapter 7 discharge or four years for a Chapter 13 discharge.
If you filed for Chapter 13 and were discharged, you will only wait two years to receive another Chapter 13 discharge. You could wait up to six years for a Chapter 7 discharge depending on how much you paid under your repayment plan.
Refiling After Dismissal
If you file for bankruptcy and the court dismisses your case without prejudice, you will be able to refile for bankruptcy shortly afterwards. Dismissal without prejudice doesn’t restrict how long you need to wait before you can refile.
If the court dismisses your case with prejudice, you will be barred from refiling for bankruptcy for a specified time period of 90 days to one year. Chapter 13 dismissals prohibit you from refiling for 180 days. The court grants dismissal with prejudice when it finds that the reason behind the dismissal is concerning. Or the court my dismiss your case if it finds that you abused the bankruptcy system. In extreme cases, the dismissal with prejudice could include a permanent injunction that will not allow you to ever file another bankruptcy case again.
Learn More About the Difference Between Bankruptcy Dismissed vs. Discharged
If you are considering bankruptcy but not sure if it is right for you, we can help. If you would like to set up a free consultation with one of our bankruptcy attorneys, you can call us or fill out our contact form today.