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What’s the difference between bankruptcy discharge and dismissal?

On Behalf of | Feb 4, 2025 | Bankruptcy |

Bankruptcy terms can be unfamiliar and often misleading. However, if you’re considering filing for Chapter 7 bankruptcy, it’s crucial to know and understand the terms you’ll see, hear and read during the process. This can help successfully complete it and get a fresh financial start.

Two terms that many people use incorrectly or interchangeably are “discharge” and “dismissal.” In bankruptcy, they’re two very different things. While both might sound positive, one is definitely not what you want. Let’s take a brief look.

What is a discharge?

In Chapter 7 bankruptcy, the goal is typically to discharge as many debts as possible. When debts are discharged, the bankruptcy court enters an order of discharge. That means the debtor no longer owes the creditors to which the discharged debts were owed. Collection efforts must end. This is a big relief and the start of rebuilding.

To qualify for a discharge, however, a debtor must abide by the regulations and any other orders issued by the bankruptcy court. For example, they must:

  • File all required paperwork (like statements and schedules) by the due date and complete them fully and accurately
  • Attend the 341 creditors meeting, which in personal bankruptcies is typically more for the bankruptcy trustee than the creditors
  • Complete a financial management course and file the certificate of completion

They must also hand over all “non-exempt” property that the bankruptcy trustee is allowed to take to help pay off the debts. 

When can a bankruptcy filing be dismissed?

If a person fails to complete these steps or if they’re found to be engaging in fraud in any way (for example, hiding assets or misrepresenting their finances), the court can dismiss the case. This is sometimes referred to as being “dismissed without discharge.” That means the bankruptcy filing can’t proceed and creditors and collectors may resume their efforts to get what’s owed them.

Generally, if a case is dismissed, a person can refile in six months. However, that means more time and additional fees. If you determine that bankruptcy is your best option, you want to get it right the first time you file. That’s one reason that it’s smart to have legal guidance before you file and throughout the process.

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