The Difference between a Discharged Bankruptcy and a Dismissed Bankruptcy

Having a dismissed bankruptcy and a discharged bankruptcy are two completely different things. Bankruptcy is dismissed when the borrower or court stops the process before it is resolved. Bankruptcy can result in discharged debts if the process comes to a conclusion and some of the debts of the borrower are forgiven.

Why Bankruptcies are Dismissed

Bankruptcies are dismissed for one of two reasons. First, the court can put a stop to the process if it determines the individual who filed is not actually eligible. This occurs if the court finds the person was hiding assets or income in order to attempt to have debts discharged that he or she could reasonably pay. The second scenario for a dismissal is when the borrower himself or herself calls off the process. This can occur if the borrower comes into an unexpected salary or payment that allows for the resolution of debts without a court settlement. It is better to resolve debts without bankruptcy when possible. However, a dismissed bankruptcy will still appear on your record if it is ever searched in full by a future lender or business partner.

Why Debts are Discharged

Debts are discharged only when the court determines there is sufficient reason to do so in the process of filing a bankruptcy. Lender violations of proper lending practices or statutes of limitations on debt are the most common reasons for discharge. However, some courts will discharge a debt if they determine repaying the debt would place the person filing for bankruptcy in a very compromised financial situation. Even in that case, the filer must usually repay a portion of the debt and have only the remaining sum discharged. 

When to File Bankruptcy

Filing bankruptcy should not be taken lightly. It is a legal process that will significantly impact your financial future. Do not enter bankruptcy the second you lose your job or miss a payment on a loan. Instead, try other solutions to debt, such as modification, refinancing or deferment during difficult financial periods. If these options do not get you back on your feet, if you qualify for bankruptcy, you should at least consider entering the process. Bankruptcy provides numerous legal protections from creditors that can be necessary in order for you to regain your ability to meet day-to-day expenses. For many debtors, bankruptcy is the only permanent solution to getting a clean start and living debt free.

When to Dismiss a Bankruptcy Claim

Dismissing bankruptcy does not delete the record of your filing from your background. However, dismissing bankruptcy may delete the record from your credit score. Since a credit score is the primary criteria used in considering future loans, this can be a good reason to consider dismissing your bankruptcy request. Those borrowers who enter bankruptcy, though, typically do so after years of weighing their options and attempting to repay debts. Do not act hastily to dismiss the court process just because you think there may be another option. It is best to weigh the decision to dismiss a bankruptcy with as much consideration as you weighed the decision to file in the first place. 

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