Bankruptcy Case Dismissals & How To Avoid Them

Many worry that their case won’t be accepted if they file bankruptcy without the help of a bankruptcy lawyer. Even though it’s scary to think that this may happen, it doesn’t really work that way. You are allowed to file bankruptcy without a lawyer. And, as long as you follow the bankruptcy court’s instructions and complete all required steps, the risk of having your case dismissed is actually pretty low. 

What Does “Dismissed” Mean?

When a bankruptcy case is dismissed, it’s effectively been “thrown out” by the bankruptcy court. Even though it sounds a lot like “discharged” it’s quite the opposite. As a bankruptcy filer, you want to avoid a dismissal while working towards your bankruptcy discharge. 

What Are The Consequences Of A Dismissal?

A bankruptcy dismissal is a court order just like a bankruptcy discharge. As a result, it has consequences for the person filing bankruptcy and their creditors. 

Automatic Stay Protections End

After a case is dismissed, the bankruptcy laws no longer protect you from creditors. The automatic stay goes away. Lawsuits filed against you can start back up, as can wage garnishments. 

It’s as though you never filed bankruptcy in the first place. Except that you did, and that fact will stay on your credit report. 

Automatic Stay Protections May Be Limited In a New Case

Having a case dismissed can also affect your ability to file bankruptcy again. In fact, filers who had their first filing dismissed in the 12 months before filing bankruptcy again only get a 30-day automatic stay in their new case. If you’ve had 2 or more bankruptcy cases dismissed in the 12 months before filing, you don’t get an automatic stay at all. In both cases, you can ask for an  automatic stay, but you’ll have to show the court that this case is different than the last one. 

While that may sound harsh, there’s a good reason for it: It prevents so-called “serial filers” from abusing the bankruptcy system. Without these limitations, someone could file a Chapter 7 or Chapter 13 bankruptcy case to stop a real estate foreclosure, then let the case get dismissed. Once the foreclosure is back on the calendar, they could file a new case to stop it, over and over again in a relatively short period of time. In that scenario, it’ll be almost impossible to show that they’re not acting in bad faith, so it’s not likely that the court orders the automatic stay to go into effect when a new case is filed. 

The Most Common Reasons for a Case To Be Dismissed

Bankruptcy dismissals happen for a reason - usually one related to the filer’s failure to do something they’re supposed to do under the bankruptcy laws. 

Failure To Pay Court Filing Fee

Someone filing bankruptcy has to pay a court filing fee unless they receive a fee waiver. Since the bankruptcy courts realize that folks in need of debt relief may not be able to save up the full fee before filing their bankruptcy case, filer's can apply for installment payments. 

Typically, a certain amount is due when the bankruptcy petition is filed. The rest of the fees can be paid over up to 4 months, based on a payment plan set by the court. Non-payment will result in a dismissal. While the bankruptcy court may give the filer a grace period after a missed payment, that is not guaranteed. 

Failure To File All Bankruptcy Forms

As long as you’ve taken the credit counseling course, you can start the bankruptcy process by filing only the bankruptcy petition and paying the filing fee. Sometimes that’s called an “emergency filing.” But, the Bankruptcy Code requires that all bankruptcy forms be filed eventually and there are strict deadlines to get that done. 

If you don’t submit your schedules, statements and other required bankruptcy forms (including any local forms your court may require) by the deadline, your case will be dismissed. You can ask for an extension by filing a motion with the court, which is not that uncommon for filers who have a bankruptcy attorney helping them. Either way, if all the forms are not filed by the deadline, the bankruptcy case will be dismissed. 

Failure To Attend The Meeting Of Creditors

A meeting of creditors is scheduled for every bankruptcy case. Attending this meeting is one of the requirements to get your bankruptcy discharge. A no-call no-show at the meeting of creditors is one of the fastest ways to get a case dismissed. Of course, if something comes up that prevents you from attending your meeting of creditors, you do have options. The first thing you’ll need to do is contact your bankruptcy trustee and explain what’s going on. 

Process For Dismissal

For some things, the dismissal process is automatic. For example, if you don’t pay the filing fee even though you didn’t get a fee waiver, the court will dismiss the case. The same is true if you don’t file all of your bankruptcy forms on time. 

Other times, the court orders a dismissal after the bankruptcy trustee files a motion asking for it. That can happen if you don’t show up at your meeting of creditors or otherwise refuse to cooperate with the trustee. 

In Chapter 7 bankruptcy, a trustee’s motion to dismiss is not as common as they are in Chapter 13. In a Chapter 13 bankruptcy, a 3 - 5 year repayment plan is established. A case can be dismissed if the filer doesn’t make all Chapter 13 plan payments, or fails to send their tax returns to the trustee every year.

Can I Ask The Court To Dismiss My Own Case? 

You can ask, but how successful you’ll be depends on the type of bankruptcy you filed. There’s no right to a “voluntary dismissal” in Chapter 7 bankruptcy. It’s easier in Chapter 13, as there’s no way someone can make you stay in a repayment plan if you don’t want to. 

How Can I Avoid A Dismissal?

Since the bankruptcy process is predictable, you can take certain steps to make sure your case is not dismissed. They include: 

• make sure you complete the means test before filing so you know that you’re eligible

• paying the filing fee in full at the time of filing your bankruptcy petition or making sure that you have a plan for making all installment payments on time

• submitting all bankruptcy forms at once

• providing your bankruptcy trustee with your last two federal tax returns and any other documents they may request before

• attending the meeting of creditors

• completing your financial management course

Note that not taking financial management won’t necessarily result in your case getting dismissed; instead, as long as all other requirements are met, the bankruptcy trustee can finish up their tasks and then ask the court to close your case. Since this won’t result in a discharge, it has the same effect as a dismissal. But it’s easier to get your fresh start as you can file a motion to reopen the case. Once the court orders your case reopened, you can file the financial management course certificate and get your discharge order. 

Is there anything I can do if my case is dismissed? 

Yes, but your options may depend on why the case was dismissed, and how long it’s been since the dismissal. Check out this article in Upsolve’s Learning Center to learn more. 

Let’s Summarize

When a case is dismissed, the United States bankruptcy laws stop protecting you. Credit card companies can start contacting you again, cars can be repossessed if your car loan payments aren’t current, and foreclosures and wage garnishments can resume. But… 

...if you meet all eligibility requirements outlined in the Bankruptcy Code, pay your filing fee, submit all your bankruptcy forms, complete the credit counseling course before filing and the debtor education course after filing, and show up for your meeting of creditors, there’s no reason to worry about the court not accepting your filing. 

If you have complicated issues, or it’s only been a short period of time since your last filing, it makes sense to talk to a  bankruptcy lawyer before filing a new case. If you haven’t filed before, and can’t afford to hire a bankruptcy attorney to help you with a Chapter 7 bankruptcy filing, see if you’re eligible to use Upsolve’s free tool to prepare your forms.