Bankruptcy Dismissed vs Discharged
If you have never filed for bankruptcy, you might have heard bankruptcy-related terms like “dismissal” and “discharge,” but you may not know what they mean. When you find yourself in debt or serious financial trouble and are considering filing for bankruptcy, you will need to know the differences between bankruptcy dismissal and bankruptcy discharge and what effect both can have on your bankruptcy case.
When you have questions about the bankruptcy process and what a dismissal or a discharge means to for your finances, let the experienced North Carolina bankruptcy lawyers from Sasser Law Firm help you understand the bankruptcy process and explain more about your rights and options in bankruptcy. We have three board-certified bankruptcy attorneys who have the specialized legal knowledge and experience you need to help you no matter what may come up in your bankruptcy case.
We’ve helped over 8,500 individuals and businesses throughout North Carolina file for bankruptcy, including bankruptcy petitions under Chapter 7, Chapter 11, and Chapter 13. We regularly work with clients facing serious financial emergencies, including auto repossession or foreclosure on their home.
Contact the dedicated bankruptcy attorneys of Sasser Law Firm today to schedule a free and confidential initial consultation to go over your legal rights and options and to learn more about what a dismissal or a discharge may mean in your bankruptcy case.
What Is Dismissal in Bankruptcy?
A dismissal in bankruptcy means that the bankruptcy court has stopped all proceedings in the main bankruptcy case and in all adversary proceedings related to the bankruptcy case and that the bankruptcy court has not entered a discharge order in the case.
A bankruptcy court may choose to order dismissal of a case on its own, such as when the debtor commits misconduct in connection with the bankruptcy proceeding (for example, knowingly concealing assets from the court or the bankruptcy trustee, or failing to make required payments under a Chapter 13 repayment plan), or if the judge deems the filing abusive.
The bankruptcy trustee, the US Bankruptcy Administrator, or a creditor may file a motion for dismissal of a bankruptcy case. Occasionally a Motion to Dismiss may seek a bar to refiling for a period of time.
A debtor may file a motion to voluntarily dismiss their bankruptcy case, which the bankruptcy court may grant if it finds the debtor meets the requirements for voluntary dismissal. However, voluntarily dismissing your own bankruptcy case can negatively impact your options for filing for bankruptcy in the future or the right to an automatic stay in a future bankruptcy case.
Bankruptcy Dismissed: Now What?
If you have obtained a voluntary dismissal of your bankruptcy case after a Motion for Relief from Stay was filed, your option to refile in the next six months may be limited.
If the court has dismissed your case or if the bankruptcy trustee or a creditor successfully moved to dismiss the case, the dismissal of your case may be designated as “without prejudice” or “with prejudice.” If your case is dismissed “without prejudice,” you have the option to file a new bankruptcy petition immediately. If the case is dismissed “with prejudice,” then you are not permitted to file bankruptcy for 180 days. Even if the prior case was dismissed without prejudice there may be limitations on the automatic stay in the next case.
When your bankruptcy case is dismissed under whatever circumstances, you will still have a notation on your credit report of your bankruptcy filing. Because dismissal means the end of the automatic stay, creditors can immediately recommence trying to collect your debts, including resuming contacting you regarding your debts and resuming repossession, garnishment, or foreclosure efforts.
What Is Discharge in Bankruptcy?
A bankruptcy discharge refers to the order of the bankruptcy court, issued at the end of a bankruptcy proceeding, which releases a debtor from personal liability for certain types of debts (often referred to as “dischargeable” debts). A debtor who successfully completes a bankruptcy proceeding cannot be legally required to pay any debts subject to the bankruptcy discharge.
Any creditor holding those debts cannot take any legal action to collect those debts and cannot communicate with the debtor regarding those debts. Most unsecured debts fall under a bankruptcy discharge order.
In Chapter 7, the bankruptcy court will issue the discharge at the end of the time period for creditors or other interested parties to file an objection to the discharge or to the bankruptcy petition, usually about three to four months after the initial filing of the bankruptcy petition. Occasionally the discharge is delayed past that time frame. In individual Chapter 11 bankruptcies and in Chapter 13 bankruptcies, the court will grant discharge upon satisfaction of the repayment plan, which generally lasts anywhere between three and five years.
The court may decline to issue a discharge in any case where the debtor fails to take the required credit counseling and financial management courses. Also, prior filings may impact whether or not a discharge order is entered. Otherwise, provided the debtor meets the requirements of the type of bankruptcy they are pursuing and provided no objections have been filed, the court will typically automatically issue the discharge at the conclusion of the bankruptcy proceeding.
Bankruptcy Discharged: Now What?
If the bankruptcy court orders a discharge in your case, a copy of the discharge order will be sent to you by the court to you and to all your creditors. This notifies creditors that all eligible debts have been discharged and that no further collection efforts should be made on those debts. If a creditor tries to collect on or communicate with you regarding a discharged debt, the creditor can be subjected to sanctions by the bankruptcy court for contempt of the discharge order.
The debts that can be discharged vary depending on the chapter of bankruptcy. A debtor remains responsible for paying any non-discharged debts. However, a debtor no longer has any legal obligation for discharged debts. A debtor may voluntarily choose to pay discharged debts even though they cannot be legally enforced.
Under limited circumstances, the bankruptcy trustee, a creditor, or the U.S. Bankruptcy Administrator seek to revoke a debtor’s discharge. This usually occurs when a debtor has fraudulently filed for bankruptcy and obtained the discharge, failed to disclose material information such as assets, or committed other misconduct listed in the Bankruptcy Code.
If you are facing the prospect of bankruptcy or have already filed a petition and have questions about bankruptcy dismissals and discharges, contact the experienced North Carolina bankruptcy lawyers at Sasser Law Firm today for a free case evaluation to learn more about your legal rights and options.