What Happens If Your Bankruptcy Is Not Discharged?

The end result of a typical bankruptcy case is the bankruptcy discharge, which removes the obligation of the debtor to pay his debts. If the bankruptcy court dismisses your case instead of granting you a discharge, you are not under the protection of the court and to a large degree things will be the same as they were before you filed bankruptcy. However, the act of just filing for bankruptcy can have long-lasting credit effects.

Resumption of Collection Activities

The automatic stay is a provision of bankruptcy that goes into effect at the time you file your petition. The automatic stay is like a temporary discharge, in that it prevents creditors from trying to collect money from you for your outstanding debts. If you do not get a discharge in your bankruptcy case, the effects of the automatic stay are no longer in force. As a result, your creditors can resume their collection activities, as you still legally owe your debts.

Effect on Future Bankruptcy Filings

Generally speaking, if the court dismisses your bankruptcy case, you can file again right away. In certain situations, however, you may have to wait 180 days before you can file again. If you withdrew your petition in response to a creditor contesting the automatic stay, you must wait 180 days to file. Similarly, if you violated a court order, or if the court determines that you either filed fraudulently or somehow abused the bankruptcy system, you must wait 180 days to file.

Credit Effects

As soon as you file a bankruptcy petition, the credit reporting agencies are required to report it. If the court dismisses the case before discharge, the bankruptcy still appears on your credit report for as long as 10 years in the case of a Chapter 7 bankruptcy. Even if you voluntarily withdraw your bankruptcy petition, the mere act of filing is enough to keep it on your credit report for as long as if you had received a discharge.

Causes

Oftentimes, a court will dismiss a bankruptcy procedure due to simple procedural errors. These errors tend to occur more often with debtors who represent themselves in a bankruptcy case by filing "pro se." Typically errors that lead to dismissal include not taking your required credit counseling or debtor education classes, not signing the bankruptcy petition where required, or failure to attend the mandatory meeting of creditors.

References

About the Author

John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.