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What to know about bankruptcy discharges and denials

On Behalf of | Jun 10, 2021 | Consumer Bankruptcy |

Bankruptcy in Chicago, Illinois, gives consumers a means of erasing some debt through several types of bankruptcy. Chapter 7 is the most common, which liquidates and sells assets, and Chapter 13 allows individuals to repay debt through a court-approved plan. The end goal is a discharge to absolve them of debt, but sometimes, discharges get denied.

Dismissal vs. discharge

Some think dismissal and discharge are the same, but they differ. The discharge occurs after the individual has completed all case requirements. they are no longer responsible for the debt, and creditors can no longer pursue it.

A dismissal closes the case, which commonly occurs from not adhering to the bankruptcy codes. This means there isn’t a discharge, and the individual will still owe the debt. They can ask for a voluntary dismissal, but the judge makes the final decision.

Reasons for denied discharges

Attempts to defraud by removing, destroying or concealing nonexempt assets one year before filing can cause discharge denial. Under Chapter 13, individuals must complete payment plans to avoid getting their discharge denied.

Courts often deny discharges if there was a previous Chapter 7 discharge within eight years and a Chapter 13 discharge within six years of filing for bankruptcy. Individuals are also required to take government-approved financial management courses to get a discharge. Not disclosing previous bankruptcy or failing to take required courses could get a discharge dismissed.

In addition, it’s important to note that consumer bankruptcy cases only remove exempt debts that have no collateral, such as medical or credit card debt. If an individual tries to remove a non-dischargeable debt, the discharge can get denied.

An individual filing any type of bankruptcy may want to get an attorney’s guidance throughout the process. This may help reduce the likelihood of a dismissal or discharge denial.