How Does a Dismissed Wilmington Bankruptcy Affect Your Credit?

Wilmington bankruptcy dismissal can impact your credit

Image Source: Flickr User Brian Leon

Filing Wilmington bankruptcy affects your credit score. That’s a fact. However, a discharged bankruptcy gets you on the road to financial recovery and can see your credit score rebound. But what about a dismissed bankruptcy? What does that do to your credit? Here’s a look at how a dismissed bankruptcy will affect your FICO score.

How Does a Bankruptcy Wind Up Dismissed? 

With Chapter 7 bankruptcy, the process usually happens too fast for a dismissal to happen. You generally can’t ask for the case to be dismissed once you find it. The typical way a Chapter 7 Wilmington bankruptcy ends up dismissed is if you fail to submit required paperwork or don’t attend a required court appearance such as your 341 Meeting of Creditors.

With Chapter 13 bankruptcy, because the process is lengthy and involves ongoing requirements to be met, there are many opportunities for a case to be dismissed. If you miss payments in your Wilmington Chapter 13 bankruptcy and don’t make them up, your case can be dismissed at the Trustee’s request. Also, if you don’t submit required documents or miss court appearances, it can be dismissed.

Involuntary or Intentional Dismissal?

There are two types of dismissal in the bankruptcy court’s eyes – with or without prejudice. When a court proceeding is dismissed “without prejudice,” that means you’re free to file it again later. However, when it’s dismissed “with prejudice,” that means the court has an issue with you, and you will be barred from filing a new Wilmington bankruptcy case for a period.

In some cases, you might want the bankruptcy case to continue, but it’s dismissed because you didn’t follow court orders, missed payments, etc. In other cases, you might intentionally allow the case to be dismissed by choosing not to make Chapter 13 plan payments or deliberately omitting a document or failing to appear at a court hearing.

Some people file bankruptcy, particularly Chapter 13, to stop something from happening for a time, such as a vehicle repossession or home foreclosure. With Chapter 7, it’s usually not filed with any plan to seek a dismissal. Chapter 13, though, might be used strategically to buy some time to sell your home, refinance, or find a new place to live before the foreclosure process reactivates.

Credit Scores Don't Take Circumstances into Account 

The issue with credit scores and bankruptcy dismissal is that your score won’t reflect a dismissal. However, a potential creditor might take a dismissal into account. For instance, when you file Wilmington bankruptcy, your credit score takes an initial hit. A bankruptcy dismissal won’t undo that hit from the filing. However, creditors might look deeper.

For instance, if you filed Chapter 13 and it was dismissed, and you later apply for a loan, the potential lender might see the dismissal as a sign that you don’t keep up with your financial obligations. It’s also important to know that some creditors won’t work with you if you have recently filed bankruptcy, whether or not it was discharged versus dismissed.

Credit Score Should Improve After Discharge, Not Dismissal 

There’s a big difference between a discharge and a dismissal in Wilmington bankruptcy. While both put an end to your bankruptcy case, the outcomes and impact to your credit score are different. Bankruptcy discharge means you met the requirements of the court to complete the case and obtain debt relief. Bankruptcy dismissal means you did not, for whatever reason.

After discharge, you can work on improving your credit score, and it may have some organic rebound from the debt relief you achieve through bankruptcy discharge. With dismissal, there is no debt relief, so your credit score may continue to fall. You can still work on improving your credit after your dismissal, but it will be more of a challenge because you will still have all the debt.

To find out more about the debt relieving benefits of bankruptcy, contact the Law Offices of John T. Orcutt. Call +1-833-627-0115 for a free Wilmington bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.