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There are two ways a bankruptcy case can end: through discharge or dismissal.
But while the terms "dismissal" and "discharge" may sound very similar, their meanings are actually worlds apart.
So, what's the difference between a bankruptcy dismissal and a discharge?
A debtor does not want to hear the word "dismissal" because, generally speaking, it means you lose, your creditors win, and your debt obligations remain intact.
When a bankruptcy case is dismissed, it means the case is going to end prematurely -- without a discharge -- and the creditors may immediately initiate (or continue) their legal action to collect the debts that you owe. That includes foreclosing on your property or garnishing your wages.
Dismissals can occur for a variety of reasons, such as a payment default under a Chapter 13 plan or a failure by the debtor to comply with the Bankruptcy Code.
By contrast, a discharge is music to a debtor's ears. In crude terms, it generally means you "win" and don't owe the certain specified debts anymore.
Once the bankruptcy plan is completed successfully, the petitioner will earn a discharge. When you obtain a discharge, creditors can't pursue additional collection actions in violation of state law because you're no longer liable for those debts.
But remember, obtaining a discharge doesn't necessarily release you from liability for all of your debts. For example, you'll still be on the hook for unpaid spousal support, child support, taxes, certain housing fees, and most likely, even your student loans (unless you can prove an "undue hardship," which is very difficult to do).
Also, keep in mind that your discharge can be revoked under special circumstances -- particularly if it's discovered the discharge was obtained through fraud.
If your debt has been discharged in a bankruptcy, and a creditor seeks further collection from you, you should immediately contact your bankruptcy attorney. To learn more about various bankruptcy legal terms and concepts, check out FindLaw's comprehensive section on Bankruptcy Law.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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