If you have a dismissed Chapter 13 case, you may have several options. You might be able to file a Chapter 7 bankruptcy case, even if you cannot afford to pay another attorney to help you. Upsolve provides no cost bankruptcy services to low-income Americans.
Written by Attorney Jonathan Petts.
Updated July 28, 2020
What Happens When a Chapter 13 Case is Dismissed?
When an individual cannot qualify for debt relief under Chapter 7 because of excessive income or other circumstances, that person may file for debt relief under Chapter 13. A Chapter 13 bankruptcy case is a repayment plan.
When you file under Chapter 13, you propose a repayment plan for your debts. You pay your 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. In some cases, you may pay some creditors outside of the plan, such as your mortgage payment.
In some cases, debtors have dismissed Chapter 13 cases. Dismissed Chapter 13 cases can cause several problems for debtors.
What Are the Common Reasons for Dismissed Chapter 13 Cases?
There are several reasons why someone might have a dismissed Chapter 13 case. Some common reasons for dismissed Chapter 13 cases include:
Failing to pay the Chapter 13 payments
Failing to attend the First Meeting of Creditors
Failing to meet certain deadlines
Failing to file the correct forms with the bankruptcy court
Failing to complete the Credit Counseling Course or the Debtor Education Course
Failing to submit the required documentation to the Chapter 13 trustee or the bankruptcy court
Failing to file tax returns
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 Chapter 13 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. In that case, the debtor may not have a choice but to allow a dismissed Chapter 13 case.
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What Happens After a Dismissed Chapter 13 Case?
When you are in a bankruptcy case, you are protected by the bankruptcy automatic stay. Creditors are prohibited by the bankruptcy stay from taking any actions to collect a debt without court approval.
In the event of a dismissed Chapter 13 case, the debtor is no longer protected by the automatic stay. Therefore, 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 bankruptcy case.
Can I Re-File a Chapter 13 After a Dismissed Chapter 13 Case?
Whether or not 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 your Chapter 13 is dismissed with prejudice, the court could prevent you from filing another Chapter 13 case for a specific period of time.
In addition, you could face limits on the automatic stay if you re-file a bankruptcy case after a dismissed Chapter 13 case. The automatic stay may not be in effect immediately upon re-filing another bankruptcy case.
In many cases, debtors consult a bankruptcy attorney when filing a Chapter 13 case, especially for a dismissed Chapter 13 case. Chapter 13 cases are more difficult and complex compared to a Chapter 7 case.
Converting a Chapter 13 Case to Avoid a Dismissed Chapter 13 Case
Depending on the reason why you may have a dismissed Chapter 13 case, you might want to consider converting the case to a Chapter 7 before it is dismissed. A conversion to Chapter 7 may be a good alternative to a dismissed Chapter 13 case.
To avoid a dismissed Chapter 13 case, you file a motion to convert the case to a bankruptcy case under Chapter 7. Whether or not the conversion works depends on the facts in the dismissed Chapter 13 case.
For example, if you are facing a dismissed Chapter 13 because you are unemployed, you may meet the income requirements for a Chapter 7. Completing a Chapter 7 Means Test can confirm if you are able to convert before a dismissed Chapter 13 order is entered.
Of course, you want to ensure 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 are 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 with a conversion from Chapter 13 to Chapter 7, you need to ensure that you meet the income requirements for a Chapter 7 case.
In addition, you need to re-examine your bankruptcy exemptions to ensure the equity in your property is protected from the Chapter 7 trustee.
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 you are 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 are 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 debtors, they are able to get rid of thousands of dollars in debt quickly without losing any of their property.
If this sounds like the debt solution you have been searching for, consider contacting Upsolve. We are a non-profit organization that helps low-income individuals receive the debt relief they need by filing a Chapter 7 bankruptcy. Our services are provided to low-income individuals at no cost to the individual.
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 cannot 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 process.
Knowing where to turn when you are in debt can be frustrating. Bankruptcy attorneys provide valuable services to people who need help getting out of debt. However, some people simply do not have the money to pay an attorney.
Upsolve gives individuals who cannot afford to hire a bankruptcy attorney the assistance they need to get out of debt. You can do this! You can take the first step to a debt-free life right now by requesting additional information or starting the Upsolve bankruptcy process.