What Happens When a Chapter 13 Case Is Dismissed?

When an individual doesn’t qualify for debt relief under Chapter 7 because they make too much money or had a prior Chapter filing, that person can file Chapter 13 instead. A Chapter 13 bankruptcy case is a debt reorganization.

When you file under Chapter 13, you propose a repayment plan for your debts. You make a  payment each month to a Chapter 13 trustee who pays your creditors according to the terms in the Chapter 13 plan. The amount of your Chapter 13 plan payment depends on several factors. Only certain debts - like mortgages - may be paid directly while the case is open.  In some cases, you may pay some creditors outside of the plan, such as your mortgage payment.

A Chapter 13 bankruptcy lasts anywhere from 3 - 5 years. At the end of the payment plan, any remaining unpaid debt is eliminated by a Chapter 13 bankruptcy discharge. To get the discharge, the filer has to complete the plan, which can sometimes be complicated by changing circumstances. 

Why Do Chapter 13 Cases Get Dismissed?

There are several reasons why a Chapter 13 case can be dismissed. Some are the same as for Chapter 7 cases. Things like not paying the court filing fee, not properly preparing for and attending the meeting of creditors, and not filing all required bankruptcy forms. Other reasons why a Chapter 13 bankruptcy case may be dismissed are: 

• Failing to pay the Chapter 13 payments.

• Failing to meet certain deadlines.

• Failing to propose a Chapter 13 plan that complies with bankruptcy law.

• Failing to submit the required documentation to the Chapter 13 trustee.

• Failing to file tax returns every year; not submitting a copy to the trustee.

As you can see, the reasons for a dismissed Chapter 13 usually involve the debtor failing to do something the debtor is required to do under the bankruptcy rules. However, sometimes, a dismissed Chapter 13 case is due to something beyond the debtor’s control.

For instance, if a debtor loses his or her job or becomes ill, the debtor may not have enough money to pay the Chapter 13 plan payments. If changing the plan payment or converting the case to a Chapter 7 case is not an option, there may be no choice but to let the Chapter 13 case be dismissed.

What Happens After a Chapter 13 Case is Dismissed?

While you are in a bankruptcy case, you are protected by the automatic stay. Creditors are prohibited by the bankruptcy stay from taking any actions to collect a debt without court approval.

Once a bankruptcy case is dismissed, the automatic stay is no longer in effect. That means creditors can take all collection action allowed by law. Collection activities may include collection letters, debt collection lawsuits, wage garnishments, repossessions, and foreclosures.

The only way to stop creditors from taking action to collect a debt after a dismissed Chapter 13 case is to pay the debt or re-file a new bankruptcy case.

Can I Refile Chapter 13 After My Case Is Dismissed?

Whether you can file another Chapter 13 case immediately after a dismissed Chapter 13 depends on the reason why the Chapter 13 case was dismissed. If this wasn’t your first bankruptcy case in a short period of time, the bankruptcy court could prevent you from filing another Chapter 13 case for a specific period of time. Even if you’re able to refile right away, your automatic stay may be limited. 

Especially if you’ve had a prior Chapter 13 bankruptcy case dismissed by the court, it’s best to talk to a bankruptcy attorney in your area. The Chapter 13 bankruptcy process is much more complex than a Chapter 7 case and more than 97% of all Chapter 13 cases filed without an attorney (“pro se”) are dismissed by the court.^[1] Having a bankruptcy lawyer by your side as you navigate a Chapter 13 case is usually worth the investment. 

Can I Convert to Chapter 7 To Avoid a Dismissed Chapter 13 Case?

Depending on why you’re at risk of having your Chapter 13 case dismissed, you may be able to convert it to a Chapter 7 case. Most bankruptcy courts allow you to do so by filing a simple “notice” and paying a small conversion fee. 

Whether conversion is an option depends on your situation. For example, if you’re unable to stay in the Chapter 13 payment plan because you’ve lost your job and it’s not looking like you’ll be able to get anything comparable anytime soon, you likely qualify for Chapter 7 relief even if you didn’t when the case was first filed. 

Of course, you want to make sure that you will not have any other problems when converting to a case under Chapter 7 to avoid a dismissed Chapter 13 case. If you’re behind on your mortgage payments or have property with non-exempt equity, you could face losing this property in a Chapter 7 case.

Filing a Chapter 7 Case After a Dismissed Chapter 13 Case

If you have a dismissed Chapter 13 case, you might be able to re-file under Chapter 7 as long as you’re under the income limits. You’ll also want to make sure that available bankruptcy exemptions protect all of your property since that’s not typically an issue in Chapter 13. Barring any problems, you might be able to file a Chapter 7 case to get rid of unsecured debts even though you have a dismissed Chapter 13 case.

Because you are filing under Chapter 7, you might be able to file without an attorney since you will not need to file a Chapter 13 repayment plan. You do need to make sure that the automatic stay will go into effect (and stay in effect) and that you’re not barred from filing another bankruptcy case because of the reason for your dismissed Chapter 13 case.

Filing a Chapter 7 Case Without an Attorney

If you’re struggling to pay your debts, you might want to consider a Chapter 7 case before you file a Chapter 13 case. Depending on your financial situation, you might pass the Means Test for a Chapter 7 case. In a typical no-asset Chapter 7 case, you can eliminate your debts within four to six months after filing your bankruptcy petition with the bankruptcy court. For many filers, they’re able to get rid of thousands of dollars in debt quickly without losing any of their property.^[2]

If this sounds like the debt solution you have been searching for, consider using Upsolve’s free filing tool. If you have questions or you are skeptical, watch video testimonials from our past users. You can hear from actual individuals who used our services to file a Chapter 7 case without an attorney to receive the debt relief they need.

If you need a fresh start but you can’t afford to pay an attorney to help you file a Chapter 7 bankruptcy case, take our screener to see if you're a fit for Upsolve’s free bankruptcy app. Upsolve gives individuals who cannot afford to hire a bankruptcy attorney the assistance they need to get out of debt. You can do this! 

Check out the video below ⬇️ for more on what happens when a Chapter 13 case is dismissed!