Your bankruptcy case may come to an end, but how it is closed could significantly impact your debts and liabilities. If you’ve been considering bankruptcy as an option to solve your debt issues, you may have come across terms like “discharge” and “dismissal”. While these terms easily look like the same thing, they have very opposite meanings. Read on let us take a look at why.
Chapter 7 Bankruptcy Dismissal
When a bankruptcy case is dismissed, it simply means that you are back to where you were before the case was filed in court. The court no longer protects you from creditors, which means your creditors can now resume their debt collection efforts. If you are unable to settle your debts, your creditors will be well within their rights to sue you. The time they have to file the lawsuits will be extended for the amount of time that was under the protection of the bankruptcy’s automatic stay.
Chapter 7 bankruptcy dismissal usually happens if you fail to complete your financial management course, fail to go for a hearing or fail to provide your attorney with the true picture of your valuables or income source. Some cases are also dismissed if the debtor forgets to file the proper forms, but this hardly occurs since many debtors equip themselves with proper legal representation.
So, what do you do if your Chapter 7 bankruptcy is dismissed? How and why the case was dismissed will provide clues as to how it should be addressed. For instance, if the case is dismissed because you do not qualify for Chapter 7, you can file again once you are eligible or file a motion to reopen and have your case converted to a Chapter 13 bankruptcy. If an error or a lack of payment led to the dismissal of your case, you can still refile the case at a later time. However, you will be unable to refile if you tried to pull a fast one on the system.
Obviously, no one wants a dismissal. If it happens, the bankruptcy will still be displayed on your credit report 10 years. So, if you are considering dismissal for any reason, you may want to think again.
What is Discharge?
Like dismissal, a discharge can close your bankruptcy case. As noted earlier, both terms have opposite meanings when it comes to bankruptcy. Discharge means that you have fulfilled the terms of your bankruptcy agreement, and the case is completed. However, the court issues a discharge on the required date to have your debts discharged the trustee will also have to file a no-asset report for the discharge to be effective.
This means that the creditor can no longer make any debt collection efforts, even if you never paid a certain debt. At this time, you are now finally on the road to recovery and financial freedom. Though your bankruptcy will still be shown on your credit reports for ten years, it would have less and less effective as the years go by and will reflect that those debts were discharged.
Once your bankruptcy case has been discharged, you can now begin applying for new credit lines, though your chances of getting favorable interest rates will be lower than if your credit was pristine. If you continue to make payments on your house and car this will start to increase your credit score.
However, student loans, child support, domestic support, and certain income tax debts are non-dischargeable and you should discuss those debts and any questions with your attorney.
Refiling after a Dismissal and Discharge
If your bankruptcy case has been dismissed, you should be able to refile immediately, unless the court bars you from doing so. However, even if you are barred from submitting a new petition immediately, the court will likely impose a 180-day timeline before you can refile. But there’s no need to panic, as a bankruptcy court will only take this action when a debtor fails to comply with court procedures or is attempting to fraud the bankruptcy system.
Your ability to file for a discharge again will largely depend on how your bankruptcy case closes. For instance, if you receive a discharge after filing for Chapter 7, another discharge can be approved for you after eight years. However, the time between filing depends on the chapter you filed before and the chapter you are trying to file.
Final Thoughts
Whether your bankruptcy case is dismissed or discharged, filing negatively impacts your credit. When you file, bankruptcy will be displayed on your credit report for up to ten years. If your case is dismissed, the negative report will not be removed from your credit report. As discharge will correct the debt to income ratio and if you are making regular payments on secured debts your credit score will start to rise again.
About the Author: Roxane Kaye, has been practicing law since 2002. She is admitted to practice law in Michigan state courts and before the Federal Bankruptcy Court of Eastern Michigan, Southern Division, as well as the Federal District Court of the Eastern District of Michigan. Roxane covers cities such as Burton, MI, Flint, MI, Fenton, MI, Beecher, MI, Lapeer, MI, Waterford, MI, Auburn Hills, MI, Pontiac, MI, Howell, MI, Owosso, MI, Wixom, MI, Rochester, MI, Rochester Hills, MI, Novi, MI, and South Lyon, MI.
You may contact Roxane below:
Roxane M. Kaye Kaye Law Office, PLLC
8161 S Saginaw St
Grand Blanc, MI 48439
