Consequences of Chapter 13 Bankruptcy Dismissal and Your Options

When you file for Chapter 13 bankruptcy, you seek a fresh start. However, there are times when the bankruptcy court may dismiss your case. A dismissal can happen for various reasons, such as nonpayment of fees or failure to meet specific requirements. When a Chapter 13 case is dismissed, it can have severe consequences for the debtor. This article will explore what happens when a Chapter 13 case is dismissed and what options the debtor has.

Understanding Chapter 13 Bankruptcy

Before we dive into what happens when a Chapter 13 case is dismissed, it’s essential to understand what Chapter 13 bankruptcy is. Chapter 13 bankruptcy is a type of bankruptcy that allows individuals with a regular income to reorganize their debts and create a repayment plan. This repayment plan typically lasts for three to five years, and any remaining unsecured debt is discharged at the end.

Reasons for Dismissal

A Chapter 13 case can be dismissed for various reasons, such as:

Failure to Make Payments

One of the most common reasons for dismissal is failure to make payments. The bankruptcy court may dismiss the case if the debtor misses a payment or falls behind.

Failure to File Documents

Another reason for dismissal is failing to file the required documents. The debtor must file various documents throughout the bankruptcy process, and if they fail to file these documents, the case may be dismissed.

Failure to Attend Meetings

The debtor must attend the 341 meeting of creditors and, if not represented by counsel, all confirmation hearings throughout the bankruptcy process. The case may be dismissed if they fail to participate in these meetings.

Violation of Court Orders

If the debtor violates a court order, the case may be dismissed. For example, the case may be dismissed if the debtor fails to provide certain information to the bankruptcy trustee or the court.

Consequences of Dismissal

When a Chapter 13 case is dismissed, it can have severe consequences for the debtor. Some of these consequences include the following:

Loss of Automatic Stay

When a debtor files for bankruptcy, an automatic stay goes into effect. This means that creditors are not allowed to take any action to collect the debt, such as garnishing wages or seizing assets. If the case is dismissed, the automatic stay is lifted, and creditors can resume collection activities.

Loss of Protection from Foreclosure or Repossession

If the debtor is behind on mortgage or car payments, the Chapter 13 repayment plan can prevent foreclosure or repossession. If the case is dismissed, this protection is lost, and the creditor can foreclose on the home or repossess the car.

Debt Collection

Once the case is dismissed, creditors can resume collection activities, including lawsuits, wage garnishment, and bank levies.

Loss of Fees Paid

When a debtor files for bankruptcy, they are required to pay fees. If the case is dismissed, these fees may be lost.

What to Do When Your Chapter 13 Case is Dismissed

If your Chapter 13 case is dismissed, there are a few things you can do:

File a Motion to Reinstate

If the case was dismissed for failure to make payments, you might be able to file a motion to reinstate the case. This motion will ask the court to reinstate the case and allow you to continue the repayment plan.

Convert to Chapter 7 Bankruptcy

If you cannot reinstate the Chapter 13 case, you may be able to convert to Chapter 7 bankruptcy. In Chapter 7 bankruptcy, most unsecured debt is discharged, and you may be able to keep some of your assets.

Refile for Chapter 13 Bankruptcy

If you cannot reinstate the Chapter 13 case and do not want to convert to Chapter 7 bankruptcy, you may be able to refile for Chapter 13 bankruptcy. However, please keep in mind that if your bankruptcy case was dismissed within the previous one-year period, the automatic stay would only be in effect for thirty days unless you can obtain Court permission for an extension beyond the first thirty days.

Explore Other Options

If none of the above options work for you, it may be time to explore other debt-relief options, such as debt consolidation or credit counseling. Speaking with a qualified bankruptcy attorney is essential to discuss your options and determine the best course of action.

Conclusion

In conclusion, having your Chapter 13 case dismissed can be a difficult and stressful experience. It’s essential to understand the reasons for dismissal and the consequences that come with it. If your bankruptcy case is dismissed, options are available, including filing a motion to reinstate, converting to Chapter 7 bankruptcy, refiling for Chapter 13 bankruptcy, or exploring other debt-relief options. Please consult a qualified bankruptcy attorney to determine the best course of action for your situation.

FAQs

1. Can I refile for Chapter 13 bankruptcy if my case was dismissed for failure to make payments?

Yes, you can refile for Chapter 13 bankruptcy if your case was dismissed for failure to make payments. However, you may be required to pay a higher fee to refile.

2. Will I lose my home if my Chapter 13 case is dismissed?

If your Chapter 13 case is dismissed, you may lose your home if you are behind on mortgage payments and the automatic stay is lifted. Speaking with a qualified bankruptcy attorney to talk about your options is essential.

3. Can I convert to Chapter 7 bankruptcy if my Chapter 13 case is dismissed?

Yes, you may be able to convert to Chapter 7 bankruptcy if your Chapter 13 case is dismissed. You’ll need to go ahead and reinstate your case and then seek to convert to Chapter 7. Speaking with a qualified bankruptcy attorney is essential to determine your best course of action.

4. Can I file a motion to reinstate my Chapter 13 case if it was dismissed for failing to file required documents?

You might file a motion to reinstate your Chapter 13 case if it was dismissed for failing to file the required documents. Speaking with a qualified bankruptcy attorney is important to determine your options.

5. Will I lose the fees I paid if my Chapter 13 case is dismissed?

If your Chapter 13 case is dismissed, you may lose the fees you paid. Speaking with a qualified bankruptcy attorney to discuss your options is important.

Robert Stiberman is a bankruptcy attorney with extensive experience in Chapter 13 bankruptcy cases. He has represented numerous clients in bankruptcy cases and is well-versed in the requirements of the Chapter 13 trustees. With his knowledge and experience, Robert Stiberman can provide his clients with the guidance and representation they need to navigate bankruptcy successfully.