How It Happens
For those burdened with large amounts of consumer debt, filing for bankruptcy is often the best choice to find financial relief. Individuals essentially have two options when it comes to filing: Chapter 7 or Chapter 13. The main difference between the two is that with Chapter 7 bankruptcy, a person’s assets are liquidated and divided up among their creditors, and any remaining debt (with some exceptions) is typically discharged. With Chapter 13 bankruptcy, a repayment plan is established, based on the individual’s income, to make repaying debt more financially feasible, but no assets are liquidated.
Of course, simply filing for bankruptcy doesn’t guarantee that you’re going to be approved. By understanding the difference between a discharge and a dismissal, as well as some common reasons why a dismissal may occur, you can better prepare yourself to file.
Discharge vs. Dismissal: What’s the Difference?
Most applications for both Chapter 7 and Chapter 13 bankruptcy result in the discharging of at least a portion of a person’s debts. With Chapter 7, this is almost always the case. Specifically, discharging of debt means that it is no longer legally owed.
When a bankruptcy is dismissed, on the other hand, this means that the protection of bankruptcy has been removed and the original amount that was contractually owed (minus any payments made in the meantime) are reinstated.
When Would a Dismissal Happen Without Discharge?
Nobody who files for bankruptcy wants to be dismissed, but, unfortunately, it happens more often than you might think. There are many possible reasons for a bankruptcy to be dismissed, with failing to correctly file the necessary paperwork being one of the most common. There is a wide range of paperwork that needs to be completed and filed in a timely manner in order for a bankruptcy application to be processed. Furthermore, a number of important financial documents, such as pay stubs and previous years’ tax returns, will also need to be furnished. Failure to do so can result in dismissal, though individuals will have a chance to have their deadlines extended if the need arises.
Another common reason to have a bankruptcy dismissed is that the debtor fails to attend the important Section 341 Meeting. This meeting takes place between the individual and his or her creditors, as well as the individual’s bankruptcy attorney (if applicable). This is an important meeting that is necessary for determining the terms of the bankruptcy and ensuring that the information that has been provided by the applicant is accurate. Failure to attend this meeting, either in person or via telephone/video-conference, can easily result in dismissal.
In most cases, those who are filing for bankruptcy must also complete a financial management course before any debts can be discharged. Failure to successfully complete this course can result in the dismissal of the bankruptcy without discharge of debt, so it’s always in the individual’s best interest to complete this course as soon as possible. Proof of completion will need to be provided before discharge of any debts can take place.
As you can see, there are many reasons why a Chapter 13 bankruptcy filing could be dismissed without discharge. The best way to avoid this is to have an experienced legal team on your side to walk you through the complex process of filing for bankruptcy. Ready to set up a consultation with a bankruptcy attorney at Bunch & Brock Attorneys at Law? Call us at 859-254-5522 to get started.
Attorney Matthew Bunch
Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ attorney bio ]
