A bankruptcy case is much like any other legal proceeding in that it may be affected by delays, impacted by other legal action, and subject to dismissal. This guide provides bankruptcy filers with a sense of their obligations as a debtor, how to prevent dismissal of a bankruptcy case, how to better ensure that a case is dismissed when bankruptcy dismissal is the goal, and options filers may want to consider if their case has already been dismissed.
Written by Attorney Kassandra Kuehl.
Updated July 22, 2020
Filing for bankruptcy is not always a straightforward process. A bankruptcy case is much like any other legal proceeding in that it may be affected by delays, impacted by other legal action, and subject to dismissal. You may be in a position where you’re trying to avoid dismissal of your Chapter 7 bankruptcy case or your Chapter 13 bankruptcy case. If so, there are steps you can take to better ensure that your case is ultimately successful. However, you may also be in a position wherein you’re hoping to get your bankruptcy case dismissed. If so, you may be able to accomplish this goal by taking a certain approach.
This guide provides bankruptcy filers with a sense of their obligations as a debtor, how to prevent dismissal of a bankruptcy case, how to better ensure that a case is dismissed when bankruptcy dismissal is the goal, and options filers may want to consider if their case has already been dismissed.
How the Automatic Stay Protects You in a Bankruptcy
When a Chapter 7 or Chapter 13 bankruptcy case is filed, protections afforded by theautomatic stay are immediately put into place. Essentially, the automatic stay halts repossession actions, foreclosures, garnishments, and collection activity while the filer’s case remains active. Similarly, the automatic stay prohibits creditors from sending collection letters and making collection calls demanding payment. This safeguard allows the bankruptcy court time to evaluate the merits of a Chapter 7 or Chapter 13 bankruptcy case while granting the debtor relief from collection action and creditor harassment.
What Are the Debtor’s Obligations in a Bankruptcy Case
When an individual or spouses filing jointly apply for debt relief under Chapter 7 of the Bankruptcy Code, they are obligated to complete their bankruptcy petition and schedules to the best of their knowledge and ability, and they must submit the required filing fee (or petition to have it waived). They must be forthcoming when submitting information and documents to the court and the bankruptcy trustee assigned to their case. Finally, they are obligated to attend twomandatory educational courses (one pre-filing credit counseling course and one post-filing), their meeting of creditors, and any other court appearances required in their case.
How is a Chapter 13 case different?
By contrast, those filing bankruptcy under bankruptcy Chapter 13 are required to submit completed schedules and a Chapter 13 repayment plan. Like Chapter 7 filers, they are required to be forthcoming when submitting information and documents to the court and the trustee assigned to their case, attend their meeting of creditors, and appear at certain mandatory bankruptcy court appearances. Additionally, they must make their Chapter 13 plan payments on time or risk the dismissal of their case.
Why Would a Bankruptcy Trustee Request a Case Be Dismissed?
A bankruptcy trustee assigned to a Chapter 7 case will, most commonly, request the dismissal of a case in the event that a filer doesn’t attend their mandatory meeting of creditors. However, Chapter 7 cases may also be dismissed by a trustee if a filer doesn’t properly complete and file their schedules, turn over requested documentation, or otherwise comply with mandatory directions provided by either the court or the trustee.
A trustee assigned to a Chapter 13 case may dismiss this kind of bankruptcy filing for all the same reasons. However, they may also dismiss a Chapter 13 case if a filer fails to create and submit a repayment plan, or fails to make their scheduled payments. Finally, they can request dismissal of a Chapter 13 case if the filer fails to meet plan obligations, such as selling real estate per the terms of the approved plan, or if the plan is failing for another reason. Because there are so many more opportunities for a Chapter 13 bankruptcy filer to misstep over a 3-5 year repayment period, dismissal requests by trustees are far more common in Chapter 13 cases than they are in Chapter 7 cases.
You canavoid dismissal of your bankruptcy case by guarding against all of the missteps noted above. However, if the trustee assigned to your case has requested dismissal and you want to push back against that decision, you may be able to successfully defend against the dismissal motion. If the trustee has made their decision based on incorrect information, you can provide evidence countering their assumptions. If your payment plan is failing, you may be able to request a modification of that plan. If you missed a required meeting or appearance due to a bona fide emergency, you can present evidence to that effect.
Why Would Someone Request a Dismissal of Their Own Case?
Perhaps you want your case dismissed due to a change in circumstances, such as discovery or inheritance of a valuable asset that will allow you to avoid bankruptcy or you’ve successfully negotiated a real estate loan modification. Alternatively, you may need to refile because you’ve incurred significant debt since the time you submitted your bankruptcy petition, perhaps due to an accident or significant medical diagnosis. If you hope to get your case dismissed, you can file a Motion for Voluntary Dismissal. However, it’s important to understand that this process isn’t straightforward. This bankruptcy process is subject to various conditions and you may run up against barriers that prevent the success of your motion.
Your motion is more likely to succeed if you’ve filed for Chapter 13 bankruptcy, partially because the court recognizes that a lot can change during a 3-5 year repayment period. Chapter 7 voluntary dismissals are much less likely to succeed because filers must demonstrate that they are making the motion in good faith. Courts rarely grant Chapter 7 voluntary dismissal motions.
Note that if you do submit a motion for voluntary dismissal, you may be barred from refiling for bankruptcy for a minimum of 180 days and a maximum of several years, depending on your circumstances.
Consequences of Bankruptcy Dismissal
Regardless of whether they are voluntary or involuntary, if a filer has more than three dismissals in a one-year period, any subsequent bankruptcy case refiling won’t benefit from an automatic stay. That means that regardless of your financial situation, you won’t be protected from collection activity, repossessions, garnishments, calls from credit card servicers, etc. Note also that if your case is dismissed for any reason, you won’t receive abankruptcy discharge of your debts.
Bankruptcy filers can’t expect to benefit from a bankruptcy discharge unless they meet their obligations under the law. Failure to meet these obligations can result in a bankruptcy dismissal. All filers should consider contacting a bankruptcy law firm for a free evaluation if they’re concerned about either avoiding or initiating a dismissal of their bankruptcy case. A free consultation with abankruptcy attorney allows individuals to ask questions in a confidential, no-obligation setting. In the event that you haven’t yet filed for bankruptcy and are interested in filing for Chapter 7 relief without hiring a bankruptcy lawyer, check out Upsolve’sfree online tool that may be able to help you accomplish this goal.