Bankruptcy Discharge vs. Bankruptcy Dismissal

A bankruptcy discharge is vastly different from a dismissal. One means success, the other means failure. Being dismissed means that the debtor has to start all over again, provided the dismissal was without prejudice. A discharge means you've reached the closure of the bankruptcy and are free to move on.

Receiving a Discharge

When a debtor gets a letter from the court stating that their case has been discharged, it's a good reason to rejoice. This means that the trustee felt the petitioner was up front and honest, that they proved their financial situation, and that the only way they could obtain relief is through bankruptcy. What this means for the debtor is that they are now free of all of the debt they incurred in the past. A creditor is forever barred from any contact and attempts to collect debts. The court has declared the debtor is no longer responsible for any money owed for the rest of their life.

Implications of Dismissal

There are two versions of dismissal. One is with prejudice, the other is without. Each have completely different meanings. Receiving one or the other is indication that something went wrong on either a minor or major level. It lso means that the automatic stay is now lifted and it is as if the petition was never filed.

Dismissal with prejudice means that the petitioner was found to be intentionally abusing bankruptcy. Reasons for abuse are many. What it comes down to is the trustee felt that there were egregious errors or some type of fraud being perpetrated. This type of dismissal means that the petitioner cannot file again in that court district. As filing is based on where the petitioner lives, it would take a physical move to be eligible to file in another district.

Dismissal without prejudice usually indicates that a mistake was made somewhere. The type of mistake is usually minor and is considered by the court to be unintentional. Again the automatic stay is lifted and everything returns to where it was before filing. A petitioner can move to reopen the case and pay a fee if the court agrees.

Get Legal Assistance

Bankruptcy is not an easy process. It requires laying a life bare in front of an impartial court. Talk with a lawyer at the very least before filing. Hiring one is strongly recommended for the experience and protection they provide for a petitioner. They're also capable of keeping a petitioner from dismissal and get them to discharge.