When entering into a bankruptcy case there are a number of things you need to know. Bankruptcy discharge and bankruptcy dismissal are two possible outcomes but let’s take a closer look at what they are and how they may impact you.
If you have entered into bankruptcy in the first place it is likely that you have been under pressure from creditors, perhaps have been having your wages garnished, and are finding your debts very difficult to clear. If you enter into such an agreement it is usually in your interests to try and see it through to the end so you can receive a discharge.
A bankruptcy discharge is when the bankruptcy judge presiding over your case enters an Order of Discharge. This occurs after a specified amount of time after filing your case and where you have complied with all requirements. Once you receive your discharge, your creditors will not be able to take no further steps to recover debts relating to this bankruptcy. They cannot sue you or pursue these debts any further and you can make a fresh start.
Not every bankruptcy case ends this way of course, and there may still be a stigma attached to you from having got into debt in the first place, but you will be able to start again if you have received a discharge.
It is also worth noting that once you receive a discharge you will be unable to file for bankruptcy again for quite some time, which is explained further on in terms of the different kinds of bankruptcy.
The point is, in the time until you receive the discharge you should also be taking every step you can to ensure you will not fall into unmanageable debt again.
A dismissal is not something you wish to receive during your bankruptcy. Your bankruptcy case may be dismissed if you fail to cooperate with your trustee, fail to comply with court required timelines and document requests, or in the case of a Chapter 13 filing, fail to remain current with your bankruptcy plan payments.
The good news is that you will always be served a notice first that the courts intend to file a dismissal of your case. The bad news is that unless the request for dismissal is set for hearing or to be heard by your bankruptcy judge, you may not have much of an opportunity to correct or address the issue that led to the request for dismissal of your case.
However, if you are not able to address this your case is dismissed and there will be no discharge.
If this happens there are still options. If you are able to show the courts that the error has been rectified within a reasonable time frame then you can apply for a motion to reinstate, but if too much time passes it is likely that filing a new bankruptcy case will be necessary.
In some circumstances, you may want to voluntarily dismiss your case, but this may not always be easy and is rarely advisable. Let’s take a look.
Dismissing a chapter 7 bankruptcy is notoriously difficult, in fact when you enter one you would do well to assume that dismissal on your request is incredibly unlikely.
If you stand to lose more than you expected when you first filed the case then you may want to request for it to be dismissed, but success rates for this are extremely low and the court will only normally do so if it is in the best interests of the creditors.
A chapter 13 bankruptcy is much easier to be dismissed from. Rather than a request, in chapter 13 you can file a Notice of Voluntary Dismissal. If you do file it in the form of a Motion or request, the courts will not usually say no.
However, you will want to be certain it is your best option as many of the protections you received from your creditors whilst under bankruptcy will no longer be in place and, for instance, your car may be repossessed or a creditor will have the right to demand your debt to them is repaid.
If your case is dismissed with prejudice, you will also not be able to file for another bankruptcy for the prejudice period, which is typically at least 180 days. Make sure you discuss this option with your bankruptcy attorney to ensure you are doing the right thing.
If you wish to refile for bankruptcy after discharge you can, but not after a period of time. Bankruptcy law states that you can only file bankruptcy again after eight years if discharged from a chapter 7 bankruptcy or four years if discharged from a chapter 13 bankruptcy.
This is designed so that personal bankruptcy is not a regular occurrence and that if a debtor fails to learn the lessons of being in a position to be filing bankruptcy there will be consequences. There are other options for debt relief but none of them offer bankruptcy protection.
Refiling after dismissal does not usually take a lot of time. In fact, if your case is dismissed without prejudice you will normally be able to file again immediately.
However, if your case is dismissed with prejudice this is likely to be a different matter. This will usually take place when the bankruptcy court has deemed you to have abused the system in some way. You will have to either wait until the prejudice period ends or file a motion with the court seeking permission to refile or to shorten the prejudice period. This can not only make things difficult with the courts going forward but could impact the attorney-client relationship as it will make the attorney’s job harder if you don’t comply with the rules.
In the very worst cases, a dismissal with prejudice may mean that you are banned from filing for bankruptcy for multiple years. This results in rare cases where the courts find that you have abused the bankruptcy system. There will most likely be little a bankruptcy lawyer can do in this situation. You may be able to gain other help through a debt relief agency.
These cases are usually quite rare and you would have had to commit a pretty serious violation of the rules in order for it to happen.
So you will most likely have got the picture by now that discharge rather than dismissal is your ultimate goal when it comes to a successful bankruptcy petition. A law firm that deals with these kinds of cases will be able to talk you through your options.
A chapter 13 bankruptcy offers more flexibility than a chapter 7 bankruptcy although it will usually take longer to receive a discharge since Chapter 13 take between 36 to 60 months to complete.
Here are a few points to remember:
A Chapter 13 bankruptcy dismissal, although generally easy to achieve if you request it voluntarily, is something you will want to avoid as there are consequences that will continue to cause issues for your financial situation.
When under a bankruptcy plan you will not be dealing with the creditors directly; a bankruptcy trustee will be dealing with them on your behalf and they will be bound by the terms agreed at your court hearing.
However, if your case is dismissed then the creditors will deal with you directly and it is likely they will start to demand their money sooner. There will also be interest and late payment charges possible that are not allowed when you are under a bankruptcy plan.
If you do find your bankruptcy dismissed it may still be worth trying to make your own repayment plan with the creditors. It is likely they will be open to this as long as you can show them a realistic timescale for when they will get their money back and you show you are making an effort to clear the debt.
There are certain circumstances that may happen if bankruptcy is dismissed that you would be very keen to avoid. For example, if a car loan is not being paid then the car can be repossessed. You are nearly always much better advised to keep doing what is required of you in terms of the bankruptcy agreement and get that discharge, even though it may be a long process.
Bankruptcy is a complex process, and it’s important to understand the difference between a dismissal and discharge. If you are considering filing for bankruptcy, it’s important to speak with an experienced attorney who can help you navigate the process and protect your rights.
The Stiberman Law Firm offers free consultations so that you can get all of your questions answered before making any decisions. Contact us today to get started on your path to financial freedom.
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