Q: A credit card company dismissed a collection case they had filed against me. I thought that ended it, but the debt still shows up on my credit report. The credit card company says they can do that because the case was dismissed "without prejudice."
What's that? If they dismissed their case, how can I still owe them?
A: "Without prejudice" means the case was dismissed, but not necessarily forever. The person who sued you gave up on that particular case, but not on their right to try to collect from you. Dismissing "without prejudice" preserved their right to keep trying.
The other basic way to dismiss a court case is pretty much the opposite. "With prejudice" ends not just that particular court case, but the whole legal claim the case was based on. Dismissing with prejudice forfeits the right to claim you still owe the debt.
So, "without prejudice" means it's over, but not forever. "With prejudice" means it's over, forever.
Although dismissing a collection case "without prejudice" preserves the creditor's right to sue you again, chances are they won't bother. But, legally speaking, it's still an unpaid debt. The creditor can continue to report it that way to credit bureaus, and keep bugging you for payment.
They could also sell off your account to a "debt buyer." As the name suggests, debt buyers purchase old debt, usually at steep discounts. For pennies, debt buyers acquire the legal right to collect hundreds of dollars of debt.
So, while the original credit card company probably won't refile a collection case dismissed without prejudice, a debt buyer who stepped into their shoes just might.
An agreement to dismiss a court case is a voluntary dismissal. When a judge dismisses a case, over one side's objection, it's an involuntary dismissal. An involuntary dismissal can also be with or without prejudice.
For example, at preliminary stages judges often grant a defendant's motion to dismiss a case, without prejudice. That gives a do-over to the plaintiff whose case was dismissed. If they refile, and correct things to state a valid claim, that new case can go forward.
Dismissing a case, therefore, doesn't necessarily mean it's over, with a final winner and loser. It may just mean a battle was lost, but the war will continue.
It's different when a judge decides to dismiss a case after an actual trial, or by granting "summary judgment" because there's "no genuine issue as to any material fact." That involuntary dismissal is with prejudice. Losers of those final decisions don't get a do-over. The war is over (unless there's an appeal).
So, when negotiating an agreement to dismiss a case, the flavor of that voluntary dismissal can make a difference. Creditors resist giving up their rights forever, so it's hard to get a dismissal with prejudice. If you can't, a dismissal without prejudice is second-best, but still pretty good.
Finally, your case may illustrate the dirty little secret behind high-volume credit card collections: Creditors often dismiss, rather than mess with proving you really owe the debt.
John Roska is a lawyer with Land of Lincoln Legal Assistance Foundation. You can send your questions to The Law Q&A, 302 N. First St., Champaign, IL 61820. Questions may be edited for space.