When Maryland consumers suffer financial hardships that seem overwhelming, they may consider bankruptcy. However, without proper knowledge about the protections offered by the U.S. Bankruptcy Code, the terms used in the process can be confusing. For example, what is the difference between Chapter 13 discharge and dismissal? For which chapter should they file? What is the difference between a liquidation bankruptcy and a wage-earner plan?

The first two terms are complete opposites. While discharge is a positive term for the consumer, dismissal is something a consumer does not want to hear. If a person who filed for Chapter 13 bankruptcy defaults on payments due under the arranged payment schedule of the wage-earner plan, or if he or she violates the U.S. Bankruptcy Code, the court may order a dismissal of the bankruptcy.

In contrast, upon completion of the bankruptcy plan, the filer’s remaining debt balances may be discharged. At this time, creditors may not pursue any further collection actions against the petitioner. However, certain debts are not dischargeable — including unpaid child support, alimony, taxes and more. Revocation of discharged debt can occur if it is determined that fraud led to the discharge.

Maryland residents who are considering filing for personal bankruptcy may benefit from consulting with an experienced bankruptcy attorney. A lawyer can explain the pros and cons of the different bankruptcy chapters, along with helping to define terms, such as Chapter 13 discharge and others. After obtaining the necessary information, consumers can make informed decisions about their future financial stability. A lawyer can provide valuable support and guidance throughout bankruptcy proceedings.

Source: FindLaw, “Bankruptcy Discharge, Dismissal Are Very Different”, Aditi Mukherji, Oct. 22, 2016