Discharge vs. Dismissal: What's the Difference?

What’s the Difference Between a Bankruptcy Discharge and Dismissal?

The key difference is simple:

• A discharge means you successfully completed the process and eligible debts are erased.

• A dismissal means your case was closed before you got debt relief, so you still owe your debts.

If you’re filing for bankruptcy, you probably want to eliminate debt and get a fresh start. That’s where a bankruptcy discharge comes in. A discharge is a court order that erases certain debts so you’re no longer legally responsible for paying them. This is the outcome most filers hope for.

A bankruptcy dismissal, however, occurs when your case is closed without wiping out your debt. This can happen if you don’t complete required steps, such as submitting paperwork, attending court hearings, or making payments in a Chapter 13 payment plan. If your case is dismissed, you won’t get the debt relief you were seeking, and creditors can start collecting from you again.

What Is a Bankruptcy Discharge?

A bankruptcy discharge is a court order that erases certain debts so you’re no longer legally required to pay them. This applies to credit card debt, medical bills, personal loans, and other unsecured debts. Once a debt is discharged, creditors can’t call you, sue you, or try to collect money from you in any way.

For many people, getting a discharge order is the main reason for filing bankruptcy. It provides relief from overwhelming debt and allows for a fresh financial start. But not every bankruptcy case ends in a discharge, and not all debts can be erased.

What Debts Can and Can’t Be Discharged?

A bankruptcy discharge can eliminate many types of debt, but not all. Unsecured debts, like credit card balances, medical bills, payday loans, and most personal loans, are usually discharged. These debts are “unsecured” because they don’t have collateral tied to them, which makes them easier to wipe out in bankruptcy.

However, some debts usually can’t be discharged. These include priority debts like:

• Child support

• Alimony

• Recent tax debts

• Court fines 

It’s also possible to discharge federal student loans, but this is a difficult process. You must follow extra steps and prove that your student loans are causing undue hardship. 

Secured debt, like car loans and mortgages, is a bit more complicated. Bankruptcy may wipe out your obligation to pay, but it doesn’t necessarily mean you can keep the property. If you want to learn more, check out our article on secured debt in bankruptcy.

How a Discharge Can Help You

Getting a bankruptcy discharge can give you the financial breathing room you need to move forward. Once your discharge is granted, creditors can’t come after you for those debts anymore. That means no more collection calls, wage garnishments, or lawsuits for discharged debts.

While bankruptcy won’t erase all financial struggles, it can help you rebuild. Without old debt weighing you down, you may find it easier to keep up with your other bills, save money, and work toward better financial stability.

What Is a Dismissal?

A bankruptcy dismissal means your case has been closed without eliminating your debts. Unlike a discharge, which erases qualifying debts, a dismissal stops the process before you get debt relief.

Before dismissing your case, the court will send you a notice explaining the issue and giving you a deadline to fix it. If you don’t correct the problem in time, your case will be dismissed, and you’ll lose the protection of the automatic stay. That’s the order that stops creditors from all collection actions while your bankruptcy is active. This includes wage garnishment, debt lawsuits, phone calls, and letters.

Most dismissals happen because the filer didn’t meet the requirements of the Bankruptcy Code. This could be missing paperwork, failing to take a required credit counseling course, or not making necessary payments. 

What Are the Requirements for a Bankruptcy Discharge?

To get a bankruptcy discharge in either Chapter 7 or Chapter 13 bankruptcy, you must follow all the rules and requirements of the process. These are the two most common types of personal bankruptcy, and while they have some differences, they share many of the same basic requirements.

In both Chapter 7 and Chapter 13 bankruptcy cases, you must:

• Submit all required paperwork and financial documents to the bankruptcy court

• Pay the filing fee (or get a waiver if you qualify)

• Complete two mandatory credit counseling courses

• Attend the required meeting of creditors (also called a 341 meeting)

• Cooperate with the bankruptcy trustee, who reviews your case

If you don’t meet these requirements, the court may dismiss your case, meaning you won’t get a discharge, and creditors can resume collection efforts.

For Chapter 13 filers, there’s one big additional requirement: You must make all payments in your 3–5-year repayment plan. If you miss payments, your case could be dismissed, and you’ll still owe your debts.

What Should You Do if Your Bankruptcy Case Was Dismissed?

If your bankruptcy case was dismissed, you may have options to restart the process. In some cases, you can file a motion to reinstate, which asks the court to cancel the dismissal and allow your case to continue. 

This is usually possible if you correct the issue that caused the dismissal, such as missing paperwork or an unpaid fee. Courts have strict deadlines for reinstatement, so you’ll need to act quickly.

If you can’t reinstate your case, you may be able to file a new bankruptcy case. However, depending on why your case was dismissed, you might have to wait before refiling. Some dismissals come with a waiting period, especially if the court believes you filed in bad faith. For example, if the court believes you intentionally tried to hide an asset during the filing process or mislead the court or trustee.

If you’re unsure about your options, consider speaking with a bankruptcy attorney to get legal advice on your specific case and the best path forward. Upsolve can connect you with a qualified attorney near you for a free consultation.

What Does ‘Dismissal Without Prejudice’ Mean?

Most bankruptcy dismissals are “without prejudice,” which means you’re allowed to file a new case right away if you choose. The term “without prejudice” means the dismissal doesn’t negatively affect your ability to refile — it’s as if the case was never filed in the first place.

On the other hand, a dismissal “with prejudice” is more serious. It typically means you can’t reinstate your case or file a new one for a certain period of time. The court may issue this type of dismissal if it believes you misused the bankruptcy system, such as by filing multiple cases just to delay creditors. Depending on the situation, the waiting period to file again could be anywhere from 90 days to one year.

The good news is that most dismissals are without prejudice, so unless the court specifically states otherwise, you’ll likely be able to refile immediately if needed.

What Is a Voluntary Dismissal?

In some cases, you may decide you want to dismiss your own bankruptcy case. This is called a voluntary dismissal, but you’ll need the court’s permission to do it. Whether the court approves your request depends on which type of bankruptcy you filed and why you want to dismiss your case.

• If you filed Chapter 7, voluntary dismissal is usually not allowed, especially if you’re trying to avoid turning over non-exempt property. The court may deny your request if it believes you’re trying to take advantage of the system.

• If you filed Chapter 13, voluntary dismissal is usually granted. However, if the court believes you’re dismissing your case just to avoid making payments or surrendering an asset, it may impose a waiting period before you can file again.

How Does the Dismissal of a Bankruptcy Case Affect Your Credit?

If you complete the bankruptcy process and get a discharge, this will go on your public record and be reflected on your credit report for up to 10 years. 

If your case is dismissed prior to discharge, it likely won’t appear on your credit report.

A Chapter 7 bankruptcy case stays on your credit report for 10 years. Chapter 13 stays on your credit report for seven years. Despite the long reporting periods, most Chapter 7 filers improve their credit score within several months of their bankruptcy filing.

Let’s Summarize…

Learning all the terms associated with the bankruptcy system can be tricky. Filers are usually hoping to get a bankruptcy discharge. That’s the order that wipes out certain debts and gives you a fresh start. A dismissal is very different. It means your case has been stopped before the court granted a discharge. Dismissals most often occur because the filer hasn’t met all requirements under bankruptcy law.

If your case was dismissed and you need help figuring out next steps, consider setting up a free consultation with an experienced bankruptcy attorney.