WHAT IS A DEBT DISMISSAL WITH PREJUDICE?
The above phrase may seem a bit confusing. But it is a simple one. So let’s crack it. Firstly, let us begin by understanding what exactly debt collection is. Debt collection means recovering money from accounts which may potentially be delinquent. Some companies or firms hire debt collectors for the purpose of recovering debts from debtors. But these collectors cannot threaten the debtors that they may be arrested for not paying. On the other hand, debt dismissal, in simple language means foregoing of debt by a creditor. Now, this may happen for a number of reasons. The creditor may file a suit against the debtor who has dues to be paid and is not paying. In response to this the defendant may choose to file a motion against the suit to get relief from the court if he feels he has reasons justified enough to be relieved of the dues or get an extension for payment. Now coming to the other important word prejudice. Prejudice means a preconceived opinion which is not based upon any actual or true reason or experience, that is, it is sort of an assumption. In this case, it refers to the assumption of the creditor that the debtor will not pay. If the debtor actually has some genuine reasons for non-payment, then he must approach the creditor and try to go for an out-of-court settlement. That helps both the parties.
Now another situation of a debtholder maybe when he or she has credit card dues. In such a situation, credit card debt relief maybe a good option. This refers to a situation when the bank offers relief to the customer by altering or reorganizing his debt structure. It may take various forms. The institution may consider reducing the principal amount to be repaid, it may extend the time period over which the dues need to be paid or it may lower the interest rate to provide relief to the customer. This usually happens in case of huge amounts at stake. However one needs to be careful while providing debt relief since some reckless debtors may take undue advantage of such relief and go on borrowing in excess and increase their dues carelessly. But in some situations this may be the only alternative left.
The biggest relief for a debtor maybe credit card debt termination. This means forgiving of debt by the creditor institution without any consideration. The amount of debt forgiven becomes taxable income in the hands of the debtor. Thus although debt repayment is cancelled, tax payment stands increased. However, in some cases debt termination may not be an addition to income. Some of these include situations of bankruptcy and insolvency.
Now, we will understand another important term, bankruptcy dismissal. This situation occurs when a company or a person who has filed for bankruptcy does not get it. In other words, his plea for bankruptcy is rejected. His situation remains the same and he is liable to all his creditors for his dues. Bankruptcy dismissal may arise because of various reasons, some of them being, filing incorrect forms, not meeting deadlines and not attending meetings.
Thus we can say that a debt dismissal with prejudice is the safest bet for a debtor because if his debt dismissal has taken place, that is the agreement has been signed, then he cannot be sued again by the creditor for the same dues. This means the creditor is legally debarred from asking for the same debt.