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Don’t confuse “dismissal” and “discharge” in bankruptcy

On Behalf of | Nov 27, 2023 | Bankruptcy

 If you’re considering bankruptcy and have been doing some research on the subject, you’ve likely come across some terms that are unfamiliar or at least confusing in the context of this process. Two terms that people often think mean the same thing are “discharge” and “dismissal.”

In fact, they mean very different things. Discharge is something you want. Dismissal is something you want to avoid. Let’s explain.

What is discharged debt?

Those are debts you no longer owe. You could say they’re “forgiven.” In Chapter 7 bankruptcy, you can discharge a number of debts up-front. In Chapter 13 bankruptcy, many debts that remain after a person has successfully completed their repayment plan can be discharged by a judge.

What is a dismissal?

If your bankruptcy case is dismissed, that means it can’t proceed and your creditors can return to trying to collect from you. A bankruptcy dismissal typically happens because the debtor has failed to abide by the terms of their bankruptcy.

This often happens near the beginning of the process. For example, if debtor doesn’t file complete, accurate financial statements and other documents, the case will likely be dismissed and the bankruptcy doesn’t move forward.

If you’re seeking Chapter 7 bankruptcy, a dismissal means any discharge of debt is denied. Besides not providing the requested documents and being truthful with the information provided, a debtor may see their bankruptcy dismissed for things like failing to attend a Section 341 meeting with creditors, not turning over their non-exempt property or not completing the required financial management class.

Each type of bankruptcy has its own set of requirements, which are typically based on the U.S. Bankruptcy Code. It’s critical to know what the requirements are for the type of bankruptcy you’re using and to adhere to those. If you have experienced legal guidance, you can avoid unnecessary mistakes and lapses that could derail your goals of getting your finances back on track.