Bankruptcies on a tenant background check can have one of two dispositions: dismissed or discharged.
Below you will find the major differences between the two bankruptcies when found on tenant background checks:
Bankruptcy dismissed vs discharged difference?
Basically, a dismissed bankruptcy indicates a change happened during the process of the filing where the bankruptcy was dismissed. A discharged bankruptcy indicates that it is no longer a debt on the tenant’s record.
A Dismissed Bankruptcy means that something happened in the process of filing the bankruptcy that stopped the process. This can be any of the following:
- Applicant may have reconsidered filing in the first place and decided to stop the process
- Applicant provided fake information to the court/trustee
- Applicant failed to provide necessary information to the court/trustee
- Applicant may have failed to attend a class on credit counseling
- Applicant may have failed to make payments as agreed (for a Chapter 13 Bankruptcy)
A Discharged Bankruptcy means that the applicant is no longer required to pay any of their debts that have been included. The creditors are no longer able to try to collect on these debts, or have any communication with the applicant about it. The debts have been ‘erased’ and the applicant now has a clean slate.
Depending on the landlord’s standards, either filing may be a warning sign. We’ve seen some landlords who were comfortable with dismissed bankruptcies on tenant background checks and some that see it as a sign of financial trouble. We wrote about finding bankruptcies on tenant screening reports previously, so we suggest you check that article out for more information.
Remember that according to the FCRA, bankruptcies are only reportable 10 years from the date of filing.