When you are dealing with borrowers who have filed for bankruptcy protection, it is important to understand the legal jargon used by the bankruptcy court. For example, understanding the difference between “discharge” and “dismissal” is very important to your collection activity.
The goal of debtors is to obtain a discharge (elimination) of their debt. For a creditor, a discharge of the debt means that there is no (or modified) liability for the borrower’s debts. Thus, once your borrower has discharged the debt owed to you, it is no longer collectible by you.
In contrast, the dismissal of a bankruptcy case may be good news for creditors. A dismissal is an indication that something has gone wrong in the borrower’s case. Thus, the court has ended the case by dismissing it without the debtor being granted a discharge. If the debtor does not get his debt discharged, then it remains due and owing.
These terms can easily be confused, but they have significantly different meanings. Creditors must educate themselves about bankruptcy terms to insure that they are in compliance with the law and that they are taking advantage of being able to collect debts that are still valid.
The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation. We are experienced in creditor’s rights in bankruptcy cases. If you need assistance, or are interested in learning more, please contact us at (480) 584-5660.