What is the Difference Between a Bankruptcy Discharge and Dismissal?

Debtors sometimes confuse the difference between a discharge and dismissal but they are two very different and distinct outcomes of bankruptcy.

Discharge Defined

A discharge means that all the requirements set by the court have been met by the debtor. In a Chapter 13 bankruptcy this means that all the debtor’s payments have been made in full and on time. For a Chapter 7 bankruptcy it means that all the creditors and unsecured debts listed in the bankruptcy petition (filed with the Court) have been wiped out. Once the case has been discharged creditors can no longer attempt to collect the debts owed to them. This allows the debtor a fresh start and he/she can move on without the burden of insurmountable debt.

Discharge Time Frame

A discharge usually happens more quickly in a Chapter 7 because assets are liquidated to pay creditors. A Chapter 13 discharge can take as long as three to five years because debts are partially repaid over that time according to the Court approved bankruptcy plan. A discharge is a favorable outcome for the debtor and is his/her goal for filing bankruptcy in the first place.

Dismissal Causes

On the other hand, a dismissal is not the desirable outcome for a debtor. A dismissal happens more frequently in a Chapter 13 than a Chapter 7. A case can be dismissed for many reasons like not being able to afford the Chapter 13 payments because life circumstances have changed (i.e. job loss, etc.). In either type of bankruptcy, not completing required credit counseling and financial management courses could cause a dismissal as well as if the case was improperly filed. A case can also be dismissed for fraudulent reasons, i.e. excessive credit card abuse indicating that the debtor was trying to accumulate massive debt that he never intended to repay or property transfer to a relative just prior to filing.

Dismissal, Creditors and Credit Report

Once a case is dismissed, the automatic stay placed on the creditors that prevented them from being able to collect a debt is lifted, and the creditor may resume attempts to collect a debt. After a Chapter 13 dismissal the debtor cannot file another bankruptcy for 180 days. Whether your case is dismissed, discharged, or active all three statuses will show on your credit report.

One way to ensure a favorable discharge and not a dismissal is to convert a Chapter 13 into a Chapter 7 before it is dismissed. This can be accomplished by consulting your bankruptcy attorney who is familiar with the laws and procedures.

7 replies
  1. Sandra
    Sandra says:

    In my case I filed BK7 in 12-2008 and it was dismissed (5-09) without a discharge due to a court fee I did not pay. I applied for the waiver of the fee but it was not granted. I am in the process of re-opening the case and paying the fee so that they will correcty discharge my case but it’s been 5 years. what will happen with the original discharge date on my credit reports? will it remain the same or will it show that my case (assuning they will discharge) has just been discharged this year? I am concerned becuase I am planing on buying a house at the end of the year and I am worried they will re-set dates on my credit report.

    Reply
    • Damon Duncan
      Damon Duncan says:

      Sandra,

      It’s really going to depend on what the bankruptcy judge says and how they rule. I don’t know where you are located so I can’t answer specifically about your situation unless you are in the Middle District of North Carolina. However, I would guess that your proper discharge date would be the one coming up, not the old one. You, technically, couldn’t receive a discharge before so it never actually happened. Of course, that doesn’t mean the credit bureaus won’t say that it was the old date. I hope this helps at least a little bit. Thanks!

      Damon Duncan

      Reply
  2. Name
    Name says:

    I have been dismissed in my first ch13 and refiled for my second. I then chose to have it dismissed and I am filing for my third. My meeting of the creditors is next week and I just received a letter from my mortgage company’s lawyer saying they are asking for denial of it cuz they aren’t getting enough. Does this mean I will be denied this third filing and lose my childhood home?

    Reply
    • Damon Duncan
      Damon Duncan says:

      Anonymous,

      It’s tough to really give you an answer to that question because I don’t know why they are objecting specifically. Not getting enough is not a legal argument but I have a feeling their objection is probably more detailed and probably because you aren’t paying the arrearage amount and other mortgage fees back within the 60 month time frame. If you filed with an attorney they should be able to help you fix that. If you haven’t, you should have really used an attorney to help you on this. Going forward I would try contacting the Trustee to see if they will be willing to give you more information on what would need to be done to have a successful Chapter 13 plan. You may also want to see if there are any attorneys that would be willing to be hired on to your case. I understand you may want to save some money by not having an attorney but, as you can see, it could end up costing you your childhood home instead. Good luck with everything!

      Reply
    • Damon Duncan
      Damon Duncan says:

      It depends. There likely is not an automatic stay in place because it is your third filing within a short period of time. You would have to request for an extension of the automatic stay. I’m not sure if you were working with an attorney or not during any of these bankruptcies but, if not, I would highly suggest you get an attorney for this filing. If it gets kicked out again the judge could dismiss it with prejudice (not allow you to file again for a certain period of time). As you are aware, you are running the risk of losing an important family home so it is probably worth the cost of having an experienced attorney help you.

      Reply
  3. Christy
    Christy says:

    I have just been discharged from Chapter 13 , how long does it take to get car title? Does it send paperwork showing that my land is clear to courthouse or to me?

    Reply
    • Damon Duncan
      Damon Duncan says:

      Christy,

      The answer to your questions will really depend upon more specifics in your case. If your cross was cross collateralized then they may not send you the title. Or if you had a lien on your house but there was never a motion to avoid a judicial lien filed then it too may not have been removed. If everything went through smoothly and you don’t have either of those two problems then you should be able to get the title by contacting the finance company and requesting that from them since the amount owed on the car should have been paid back. You can also check with the register of deeds in your county to see if there is still a lien on your house. If there is, contact your bankruptcy lawyer. Good luck!

      Reply

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