What Happens When a Chapter 13 Case Is Dismissed?

What Happens When a Chapter 13 Case Is Dismissed?

When a Chapter 13 bankruptcy is dismissed, your case ends and your debts aren’t eliminated. You also lose the protection of the automatic stay, which means creditors can start collecting again through wage garnishments, debt collection lawsuits, or even foreclosure. 

The payments you made during the Chapter 13 repayment plan won’t be refunded. Your remaining debt goes back to what it was before you filed, minus what you paid during your required payment plan. 

The dismissal will also show up on your credit report and can lower your credit score. You can usually file for bankruptcy again, but there may be some limits depending on why the case was dismissed.

While the bankruptcy court has the ability to dismiss your case if you fail to meet all the requirements (see more below), there’s also voluntary dismissal. This is when you decide to quit the Chapter 13 plan yourself.

Chapter 13 Bankruptcy Basics

When you file for bankruptcy under Chapter 13, you propose a repayment plan for your debts. You make a monthly payment to a Chapter 13 trustee, who pays your creditors according to the terms in the Chapter 13 plan. The amount of your monthly payment depends on several factors. Only certain debts — like mortgages — may be paid directly to creditors while your case is open.

Chapter 13 bankruptcy cases typically last 3–5 years. If you successfully complete your case, any remaining unpaid debt is eliminated by the bankruptcy discharge. 

Why Do Chapter 13 Cases Get Dismissed?

Chapter 13 cases most commonly get dismissed when the filer fails to:

• Pay the required court filing fee

• Attend the required 341 meeting of creditors

• Complete the required credit counseling courses and submit a certificate of completion to the court

• File all the required bankruptcy forms

• Propose a Chapter 13 plan that complies with bankruptcy law

• Make all required monthly payments under the Chapter 13 plan

• Meet deadlines set by the court

• Submit the required documentation to the Chapter 13 trustee

• File tax returns every year and submit a copy to the bankruptcy trustee

As you can see, Chapter 13 cases often get dismissed when someone doesn’t meet certain requirements set by bankruptcy rules. But sometimes, a case gets dismissed for reasons outside of your control.

For example, if you lose your job or face a serious illness, making your Chapter 13 plan payments might become impossible. If you aren’t able to adjust the plan payments or convert the case to a Chapter 7, dismissal may be unavoidable. 

Can I Refile Chapter 13 if My Case Is Dismissed?

Whether you can refile a Chapter 13 case after it’s been dismissed depends on why your original case was dismissed. If your case was dismissed because you didn’t meet certain requirements, you might be able to file again right away. But if you’ve had multiple bankruptcy cases in a short time frame, the court might prevent you from filing a new Chapter 13 case for a specific period.

Even if you’re allowed to refile, it’s important to know that your automatic stay — the court order that stops creditors from collecting on your debts — might be limited or not apply at all in your new case. This could affect how much protection you have from creditors while your case is pending.

If you’ve had a previous Chapter 13 case dismissed, it’s wise to talk to a bankruptcy attorney in your area before trying again. Chapter 13 cases are more complex than Chapter 7 cases, and statistics show that over 97% of Chapter 13 cases filed without an attorney (known as “pro se” cases) are dismissed. ^[1]aHaving a bankruptcy lawyer can make a huge difference in your case's success and is usually worth the investment. Upsolve can help you find a bankruptcy attorney near you for a free consultation to explore your options.

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

You might be able to convert your Chapter 13 case to a Chapter 7 case to avoid dismissal, but it depends on your situation. Converting to Chapter 7 could be an option if you can’t keep up with your Chapter 13 plan payments or if your financial circumstances have changed significantly.

To qualify for Chapter 7, you’ll need to pass the means test, which checks if your income is low enough to file under Chapter 7. If you’re eligible, converting your case can help you discharge most unsecured debts — like credit card debt and medical bills — and give you a fresh start. 

Keep in mind that Chapter 7 doesn’t offer the same flexibility as Chapter 13 if you’re trying to keep secured property like a home or car. You usually need to be current with secured loan payments to keep the property in Chapter 7.

How Do You Convert Chapter 13 to Chapter 7?

The Bankruptcy Code allows you to convert a Chapter 13 case to Chapter 7 at any time. This is usually a straightforward process where you file a “notice of conversion” with the court and pay a small conversion fee. In 2024, that fee is $25, which is the difference between the original Chapter 13 filing fee and the Chapter 7 fee. 

Typically, the court won’t require a hearing, and the process can be completed quickly. It’s a good idea to consult with your bankruptcy attorney first to make sure this is the right choice for you.

Note that Upsolve’s free filing tool can’t currently assist with this process.

Can Anyone Convert From Chapter 13 to Chapter 7?

Not everyone can convert to Chapter 7. You must be eligible under Chapter 7 rules, which include passing the means test to show that your income qualifies. 

Additionally, if you received a discharge from a previous Chapter 7 case within the last eight years, you won’t be eligible for another discharge until that period has passed. If you’ve already converted your case once before, you may need special approval from the court to convert again.

Can I File for Chapter 7 After My Chapter 13 Is Dismissed?

Yes, you can usually file a Chapter 7 case after your Chapter 13 case is dismissed, but there are some important things to consider. First, you'll need to meet the income requirements for Chapter 7 by passing the means test, which shows that your income is low enough to qualify. You’ll also need to make sure that bankruptcy exemptions can protect all your property. Losing property isn’t typically an issue in Chapter 13 but can be a risk in Chapter 7.

Timing is another factor to keep in mind. In many cases, you can file a Chapter 7 bankruptcy immediately after your Chapter 13 is dismissed. However, if your Chapter 13 was dismissed for a reason like not complying with court orders or filing multiple cases in a short time frame, the court may place restrictions on how soon you can file another bankruptcy case. 

Additionally, the automatic stay — the court order that stops creditors from pursuing collection activities — might be limited or not go into effect if you’ve had multiple bankruptcy filings within a short period.

Which Is Better: Chapter 7 or Chapter 13?

Everyone’s financial situation is different, so you’ll have to decide for yourself whether Chapter 7 or Chapter 13 is better for you. That said, if you qualify for Chapter 7 bankruptcy, it has many perks. For one, it’s much faster than Chapter 13. Most Chapter 7 filers see their debts discharged in six months or less. By contrast, Chapter 13 can take up to five years.

Chapter 7 also has a higher success rate than Chapter 13. Again, that’s because of the 3–5-year repayment plan required in Chapter 13 cases. A lot can change in 3–5 years, and it’s difficult for many people to stay committed to a strict budget and the required repayment plan for that long. Also, it’s easier to file Chapter 7 successfully without hiring a lawyer. 

That said, Chapter 13 can be a good option if you have secured debt that you’re trying to catch up on — namely a mortgage or a car loan. These loans can be folded into the required payment plan. So if you can stick to the multiyear repayment plan, you may be able to catch up on your debts, keep your home, and eventually have your remaining unsecured debts — like credit card debt — discharged.

If you’re considering Chapter 7, take our screener to see if you're a fit for Upsolve’s free bankruptcy app. You can also schedule a free consultation with a bankruptcy attorney to get legal advice about which chapter is best for you if you aren’t sure.