Once you decide to file for Chapter 7 or Chapter 13 bankruptcy, you're on your way to a fresh financial start. Your debts will be discharged or canceled, and your case will be closed. However, an alternate ending is dismissal of your case.
Bankruptcy cases can be dismissed for a number of reasons, and dismissal can be voluntary or involuntary. Learn how dismissal could be a factor in your bankruptcy case, and how it could affect your plans for dealing with debt.
Defining Dismissal: Ending Your Case Early
Filing for bankruptcy is a legal proceeding, and not every action started in court ends with a judgment. Dismissal ends a case before legal issues are decided in a judgment. The effect of dismissal is to restore the status quo with your creditors to the time when you filed your case.
Your case can be dismissed whether you file for Chapter 7 or Chapter 13. Dismissal can vary, depending on the type of bankruptcy case involved.
There are certain common situations that may cause a court to dismiss a bankruptcy case. Some depend on whether you file for Chapter 7 or Chapter 13. Common dismissal reasons include:
- Failing to complete required credit counseling
- Lying on the official bankruptcy forms, or hiding your property so that it can't be sold, or liquidated
- Failure to file the correct forms or pay the filing fee
- Failure to appear at the meeting of creditors
- Failure to make payments for your Chapter 13 repayment plan
Notice and a hearing are required for involuntary dismissal of a case.
Before you file for bankruptcy, you must complete a credit counseling course. You must take the course from an approved credit counseling agency within the 180-day period before you file your case.
If you lie on your bankruptcy forms or hide property to avoid paying creditors, you're committing bankruptcy fraud. It's a federal crime carrying possible hefty fines and prison time. Don't even think about fraud during the bankruptcy process.
Bankruptcy Forms and Filing Fee
Your bankruptcy case starts by filing a Voluntary Petition and other required forms with information about your finances, debts and creditors. There's also a required filing fee. The court can dismiss your case if you don't complete the required paperwork and pay your filing fee.
341 Meeting of Creditors
After you file all the necessary paperwork, you must attend a meeting of creditors, also called a 341 meeting. This meeting isn't in front of the judge, but in front of the court-appointed trustee assigned to your case, and usually takes place 20 to 50 days after you file your case.
The 341 meeting is generally straightforward and quick, but if you miss it, or fail to cooperate, your case can be dismissed.
Missing Chapter 13 Payments
Dismissals occur much more frequently under Chapter 13 bankruptcy than Chapter 7. This is because a Chapter 13 case lasts several years, depending on the length of the repayment plan, and missing any payments can cause the court to dismiss your case.
While it isn't common, you often have the right, as the debtor or filer, to ask for dismissal of your case. People do file for bankruptcy, but later discover it isn't the right solution for them. You might want your case dismissed if you:
- Decide filing for bankruptcy was a bad idea
- Discover some of your property won't be covered by property exemptions
- Acquire property, such as an inheritance, after you file and you don't want it included in the bankruptcy estate
- Find out certain debts won't be discharged
- Can't make your Chapter 13 plan payments
The court procedure can vary, depending on whether you filed a Chapter 7 or Chapter 13 case. The court will likely conduct a hearing on your motion to dismiss in a Chapter 7 case.
What Happens After Dismissal?
If your case is dismissed, you'll be able to file for bankruptcy again right away in most cases. If an involuntary dismissal was based on an honest mistake, you may want to appeal the court decision. If your dismissal was based on something serious, such as fraud, you may be barred from filing for bankruptcy for a set amount of time.
Be aware that bankruptcy filings are included in credit reports, so subsequent filings after dismissal may have a negative impact on your credit report and scores.
Questions for Your Attorney
- I filed my bankruptcy petition on my own, and I think I'm in over my head. Can you represent me?
- What happens if I make an innocent mistake, such as forgetting to list a debt? Is my case at risk for dismissal?
- What happens if I receive a large inheritance after my Chapter 13 plan is approved, but before all payments are made? Will I have to pay more on my debts?