When your bankruptcy case comes to an end, it is said to have closed, but how it closes could have a significant impact on your liability for your debts. For example, if the court discharges your bankruptcy, you are no longer liable for your debts. If your bankruptcy is dismissed without a discharge, however, you are still on the hook for payment. Furthermore, the automatic stay that prevents creditors from coming after you during the bankruptcy process can be shortened or eliminated altogether if you file for bankruptcy again in the future.
Discharge is the favorable outcome debtors seek when they file for bankruptcy. With both Chapter 7 and Chapter 13 bankruptcies, a discharge means you are no longer liable for certain unpaid debts. Your creditors can't pursue you for payment of discharged debts after the discharge is entered. Once the discharge is entered, unless the case has other issues pending, the court will close it. Unless you, the trustee, or an interested creditor moves to reopen your case, your case is officially over.
A dismissal can also close your bankruptcy case. If your case is dismissed, you do not receive a discharge. You might decide to voluntarily dismiss your own case, electing to end it prematurely, but this option is usually not possible with Chapter 7 if your trustee has found assets to liquidate.
A Chapter 13 bankruptcy involves entering into a repayment plan with your creditors, approved by the court. You can voluntarily dismiss your Chapter 13 bankruptcy for a number of reasons, such as inability to keep up with your monthly payments under the plan.
The court can also dismiss your case without your consent. This may happen if you fail to comply with a court procedure or if you engage in fraud. In a Chapter 13 case, it could happen if you don't make your plan payments or provide things to the trustee. Dismissal orders often include language stating that any discharge entered is vacated. When your bankruptcy case is dismissed, you are still responsible for your debts. Creditors can resume collection activities against you.
Refiling After Discharge
The manner in which your bankruptcy case closes has a large effect on when you can receive another discharge, or even when you can file for bankruptcy again. For example, if you file for Chapter 7 and you receive a discharge, you must wait eight years to file another Chapter 7 or four years to file a Chapter 13. If you received your discharge under Chapter 13, you only have to wait two years to file another Chapter 13 and receive a discharge, or six years to file a Chapter 7.
Read More: Bankruptcy Filing Vs. Discharge Date
Refiling After Dismissal
Unless the court has barred you from refiling, you can usually do so immediately if your case was dismissed rather than discharged. If the court bars you from immediately refiling, however, you must wait the prescribed period before filing again. Bankruptcy courts usually do this when a debtor deliberately fails to follow a court request or procedure.
Dismissals can also affect your right to an automatic stay if you refile. If you do so within a year, your stay will be limited to 30 days. If you've had two or more dismissals within a year and file again, you won't receive an automatic stay at all and must ask the court to impose one.
Consequences of Dismissal
Regardless of whether your bankruptcy case is discharged or dismissed, your filing will have a negative effect on your credit. When you file, the bankruptcy is reported on your credit report and it will remain there for up to 10 years. This negative reporting isn't removed if your case is dismissed.
Unless you refile and eventually receive a discharge, you'll experience only the negative outcomes of a bankruptcy filing and none of the positive ones, such as being relieved of your debt.
- U.S. Bankruptcy Court, Central District of California: Dismissal, Conversion & Closing Of A Bankruptcy Case, What Are The Differences Between Them?
- Allmand Law: How Does a Bankruptcy Case Come to a Close?
- Law Office of Jonathan T. Mitchell: Refiling Bankruptcy After A Dismissal May Only Give You Limited Protection Against Creditors
- Law Office of Jonathan T. Mitchell: Time Limits Apply to Filing Back-to-Back Bankruptcy Petitions
Based on the West Coast, Mary Jane Freeman has been writing professionally since 1994, specializing in the topics of business and law. Freeman's work has appeared in a variety of publications, including LegalZoom, Essence, Reuters and Chicago Sun-Times. Freeman holds a Master of Science in public policy and management and Juris Doctor. Freeman is self-employed and works as a policy analyst and legal consultant.