Bankruptcy / Discharge

What is Bankruptcy Discharge? 3 Things to Know About a Successful Bankruptcy

Written by Ben Tejes
Updated Dec 3rd, 2021

Bankruptcy discharge means that your debt has been forgiven. Bankruptcy dismissal means that your debt may not have been forgiven. It means that the bankruptcy was not successful.

The goal of bankruptcy is bankruptcy discharge.

A person filing for bankruptcy has come to the realization that they can no longer afford to make their minimum debt payments along with paying for their necessary living expenses. Bankruptcy is a legal proceeding in which the court helps an individual pay off their debt through a debt repayment plan or by liquidating their assets.

When you begin filing for bankruptcy, you will quickly realize there are a number of new terms you may not fully understand. Two words you may run across are discharge and dismissal. This article will cover their definitions and what they mean in your bankruptcy case. Below, you will find out everything you need to know about discharge and dismissal in bankruptcy cases.

Chapter 7 and Chapter 13 Bankruptcy Discharge

We will start with the term discharge. I would like to point out that there are some differences in definition and application between the various types of bankruptcy. Make sure you are working with legal representation if you are filing for bankruptcy so that you are as protected as you can be.

What does it mean to have the debt discharged? 

Discharge is what you hope happens to your debt. When you file for bankruptcy, the goal is to get rid of your debt. You can do this by either paying it off over an extended period of time, or liquidating your assets to pay off your creditors. Whichever you decide, there is normally some debt that is discharged from your account, which means you are not responsible for paying it. Normally, at the end of your bankruptcy case, debt that comes from things like medical bills, credit card bills, and other things are discharged, or forgiven.

When is my debt discharged?

Discharges for your debt happen at various times. If you are filing for a Chapter 7 bankruptcy, there’s a chance the court will discharge your debt in as little as four months. If you are filing for Chapter 13 bankruptcy, you may be looking at a longer wait time. Since Chapter 13 bankruptcies typically take between 3-5 years, the court may not discharge your debt until four years after filing. There is one thing that could keep your debt from being discharged as early as possible. You will have to complete several credit counseling courses while filing for bankruptcy. If you haven’t finished those courses, the court can deny your discharge until they are complete.

Will all of my debt be discharged?

Not necessarily. There are a few types of protected debt that won't get discharged. Debts that are not discharged include alimony, child support payments, government debt, and student loans. Again, what is dischargeable debts change based on which type of bankruptcy you file for. There is a wider range of dischargeable debts in Chapter 13 than in Chapter 7. The court will dismiss other debts, like medical bills, credit card debt, and more.

Can anything prevent me from having my debt discharged?

Yes. There are a couple of reasons you may not have all of your debt discharged. In Chapter 7 cases, when the court plans to dismiss your debt, a letter is sent out to your creditors telling them what is about to happen. They have a time period where they can object to the discharge. This would begin a lawsuit known as an adversary hearing between you and the individual creditor. This is not an option in Chapter 13 cases, though other things may prevent a discharge. Other things that may prevent a discharge include not completing required courses, fraudulent filing information, and concealment of property or income.

Chapter 7 and Chapter 13 Bankruptcy Dismissal

While discharge is what you are hoping for when you file for bankruptcy, dismissal is the opposite of what you want to happen. If you have your case dismissed, not only do you lose your chance at having your debt discharged, you also risk not being able to refile for bankruptcy for a while.

What does it mean to have your bankruptcy case dismissed?

Dismissal is when the court ends your bankruptcy case before completion and without a discharge. All legal proceedings will end, including any adversary proceedings. The automatic stay placed on your account lifts as soon as the court dismisses your case. This means creditors will be able to pursue you for repayments immediately.

Why can bankruptcy cases be dismissed?

The court can dismiss your Chapter 13 bankruptcy or Chapter 7 bankruptcy case for a variety of reasons. Reasons can range from intentional fraud to mistakes on your paperwork. Here is a more extensive list of reasons your bankruptcy case may be dismissed:

  1. Committing bankruptcy fraud
  2. Failing the bankruptcy means test
  3. Not paying the court fees
  4. Forgetting required paperwork or court documents
  5. Missing court dates and meetings
  6. Not complete mandatory financial courses
  7. Missing Chapter 13 payments

Can I voluntarily have my bankruptcy case dismissed?

For Chapter 13 bankruptcies, yes you can. You may request dismissal for your case for a few reasons. It is hard to tell, at the beginning of your case, what the payments will be for your new debt repayment plan. If you realize once you have already filed for Chapter 13 bankruptcy that you cannot make the payments, you may ask the court to dismiss your case. Also, if you are falling behind on your mortgage payment while in the middle of your Chapter 13 case, there is a possibility that having your case dismissed, and then immediately refiling could save your home from  foreclosure. While this may sound like a good idea, there are some consequences.  It is important that you are communicating with legal representation to protect yourself. 

What happens when my case is dismissed?

As mentioned earlier, after dismissal, there is a lift on your automatic stay. This means that creditors will once again begin demanding repayment for your debts. At that point, you will take over responsibility for all of your debts, as they were prior to filing for bankruptcy. If you had an altered payment plan under your Chapter 13 bankruptcy case, creditors are no longer bound to honor that schedule. If your case was involuntarily dismissed, you will have to wait 180 days before you can refile for bankruptcy again.