If you’re considering bankruptcy as the best way to get out from under an ever-growing mountain of debt, you’ve likely been doing some research. Reading about bankruptcy law and the process that’s involved can feel like trying to navigate a foreign language. Further, even words that may seem clear can have different meanings when applied to bankruptcy.
Here we’ll discuss two commonly used terms that are often confused or used interchangeably: Discharge and dismissal
What does it mean when a debt is discharged?
When a specific debt is discharged in bankruptcy, the debtor no longer owes it. Discharged debts are also considered “forgiven.”
Debts are more likely to be discharged (or at least discharged early) in Chapter 7 bankruptcy. Once a debt is discharged, a debtor is no longer liable for it, and creditors can no longer attempt to collect it.
In Chapter 13 bankruptcy, which involves a reorganization of debts and a payoff plan of three to five years, any discharge of debt is most likely to occur after that plan is completed if some debts still remain.
What is a dismissal?
While having a case dismissed is good news for a criminal defendant, it’s typically bad news for someone who’s filing for bankruptcy. A dismissal in bankruptcy typically refers to the bankruptcy case being dismissed by the bankruptcy court. That means a person can’t proceed with their bankruptcy.
When a case is dismissed, it’s typically because of something the person filing for bankruptcy failed to do. For example, many cases are dismissed early in the process because a debtor hasn’t provided the necessary documents or their documents aren’t accurate.
A bankruptcy case can be dismissed at any time if someone doesn’t abide by the requirements of the law. For example, a case can be dismissed if a debtor doesn’t complete one of the mandatory classes required to help them gain financial management skills.
Mistakes and oversights that are grounds for dismissal can be avoided when debtors have legal guidance throughout the process. That’s one reason it’s wise not to try to deal with bankruptcy on your own.