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What’s the difference between bankruptcy discharge and dismissal?

On Behalf of | Jan 9, 2024 | Bankruptcy

If you’ve been reading up on bankruptcy as you consider whether this is the best choice for you, you’ve likely come across a lot of new and confusing terms. They may even sound like they mean the same thing when they don’t.

Two words used frequently when discussing bankruptcy that people often incorrectly interchange are “discharge” and “dismissal.” Let’s look at how these two very different things play a role in the bankruptcy process.

What does it mean for debt to be discharged?

Debts that are discharged in bankruptcy are those no longer owed. Another word for them is “forgiven.” 

People who file for Chapter 7 bankruptcy generally get a large number of their debts discharged early. Those who file Chapter 13 typically are seeking to reorganize their debts into a manageable payoff plan rather than discharge them. However, a judge can discharge many types of debts that remain after a repayment plan is completed.

What is a dismissal?

This is not something you want if you file for bankruptcy. If your case is dismissed, you can’t proceed and you still have to pay your debts. 

A bankruptcy court will dismiss a case if the debtor has failed to comply with the requirements of the law. A bankruptcy case can be dismissed early in the process if a debtor doesn’t provide complete or accurate documents like financial statements.

Sometimes, it occurs later in the process – for example, if a debtor fails to complete a mandatory financial management class, doesn’t attend a required meeting or otherwise neglects to fulfill a requirement. 

“Unforced errors” that result in a bankruptcy dismissal can be easily avoided. It simply takes having experienced legal guidance from the beginning.