When Your Bankruptcy Case Is Dismissed

Money troubles can come back swiftly once the court dismisses your bankruptcy case. Instead of the fresh start you anticipated, you remain burdened by debt, and creditors will be back pressing for payment. You should understand the reasons behind the dismissal and the steps available to move forward to help you regain control of the situation.

A bankruptcy dismissal typically happens due to missed deadlines or when you violate obligations that relate to your repayment plan. Although these difficulties are serious, courts can reconsider dismissals. You can correct the situation by re-filing your petition or looking into additional debt relief options. The information below explores bankruptcy dismissals in detail.

Understanding a Bankruptcy Discharge and a Dismissal

When you initiate a bankruptcy case, it is often due to your inability to manage excessive debt and the desire to have it erased or discharged. You will usually receive a discharge if the case proceeds to its logical conclusion. Once discharged, creditors can no longer collect qualifying debts under bankruptcy. The discharge becomes your shield from collection efforts. You can start over by ridding yourself of most of your financial burdens.

However, to have your debts discharged means you have to comply with the court’s requirements, explicitly meeting deadlines, for example, those set in your payment plans, and providing proper documentation. Only once you have met these requirements will the courts grant the discharge.

A dismissal happens before a discharge order is granted. When the courts dismiss a bankruptcy case, the courts halt all ongoing proceedings, undoing any progress toward debt relief. Without a discharge order, your debts remain, and creditors can resume collection efforts.

Bankruptcy dismissals can happen in various ways, namely:

• You could request a dismissal as the debtor
• The court could initiate the dismissal or
• By creditors and trustees who seek dismissal if you fail to comply with the legal requirements

Note: The usual Chapter 7 process lasts roughly four months once you file for a discharge, provided no complications arise. Chapter 13 bankruptcy cases extend over an extended period, typically completed in three to five years.

Types of Bankruptcy Dismissals

The various forms of dismissals can generally fall into two broad categories, namely:

• Voluntary dismissal and
• Involuntary dismissal

Let us look at each in greater detail.

1. Voluntary Dismissal

You can request the courts dismiss your bankruptcy case. However, this request may not be accepted immediately. The result depends on the bankruptcy chapter you filed.

Chapter 7 bankruptcy proves to be more challenging to have it dismissed. For any dismissal request to be successful, the court has to agree and usually will only grant it if it benefits creditors. If the courts believe that dismissing the case aligns with the creditor’s interests, the court is very likely to proceed with the dismissal request. In this situation, the Chapter 7 trustee will take charge of the case and manage the sale of your assets to ensure payouts go to creditors.

Dismissing a Chapter 13 case is usually easier to achieve. Courts allow debtors to notify them of their intent to dismiss the case. You might be required to submit a formal motion. The courts generally cannot force you to proceed in a Chapter 13 bankruptcy if you wish to stop. However, it is important to realize that dismissing the case could have significant implications. Circumstances change when you decide to file a dismissal of the Chapter 13 bankruptcy proceedings. Most notably, this affects your automatic stay protections. This provision stops debtors from canceling their cases and re-filing immediately to reclaim protections.

If you file bankruptcy multiple times within one year, the automatic stay may only last a short time. If a creditor has moved to remove the automatic stay, you must wait to file subsequent bankruptcy cases.

2. Involuntary Dismissal

You qualify for a debt dismissal when you follow the rules courts impose. If you fail to comply or prove dishonest, the court could dismiss the bankruptcy proceedings before you receive a discharge. The circumstances are similar if you fail to cooperate with the bankruptcy trustee.

Different circumstances can cause a bankruptcy trustee or creditor to submit a motion asking for dismissal if you fail to comply with the necessary conditions. You should file your bankruptcy forms, schedules, and tax documents by the deadline. You must participate in the 341 creditors meeting since it enables creditors to challenge your financial details.

In Chapter 13 bankruptcy cases, your payments must be current, and you must maintain your alimony or child support payments. Giving precise and thorough details in your documentation, along with meeting the means test and finishing the necessary financial education, is vital.

When the trustee asks to dismiss your bankruptcy case, you can avoid the dismissal by correcting the issues, fulfilling the outstanding requirements, and submitting the required documents.

If the courts dismiss your bankruptcy case without prejudice, you can immediately refile for bankruptcy. However, certain conditions apply. If the court dismissed your case for rule violations like not meeting deadlines or not showing up at hearings, you could experience a waiting period. Many times, the court requires a 180-day wait before you can refile. If these restrictions are absent, you can resume your case after you improve all existing circumstances.

A ruling with prejudice imposes dire consequences. You might have to wait 90 days to a year before filing another bankruptcy. The courts could also issue a permanent injunction, which stops you from filing for bankruptcy at any time. Incidents of bad faith or misuse of the system frequently result in these penalties.

Before you attempt to refile, sort out issues that resulted in the dismissal.

Key Reasons for the Dismissal of Your Bankruptcy Case

There are several reasons courts could dismiss your case, including the following:

1. Failing to Submit Required Documents

If you fail to submit the necessary paperwork by the deadline, your bankruptcy case could be dismissed. Your financial overview requires the submission of statements and schedules regarding bankruptcy. Without adequate filings being submitted, the court cannot proceed, thus resulting in a dismissal. Minor mistakes or missing forms could put your case at risk.

2. Non-compliance With Court Orders

Upon filing your bankruptcy case, the court requires you to comply with certain directives, including attending hearings or submitting additional information when required. If you fail to adhere to these requirements, the court might dismiss your case. When you fail to comply with orders from the judge, it is interpreted as you not cooperating and thus inform the judge’s decision to dismiss your case.

3. Not Showing Up for the 341 Meeting of Creditors

The 341 meeting crucially shapes your outcome during your bankruptcy case. The trustee and creditors use this meeting to seek information regarding your finances. Your case will likely be dismissed if you fail to attend this meeting.

By scrutinizing your finances, the creditors and trustee determine if you qualify for bankruptcy and whether it is possible to liquidate any assets to fulfill claims by your creditors. Further, the trustee and creditors would also want to clarify the nature of your debt and ask for details on how those debts arose. Knowing the details of your financial commitments helps you judge which debts may be discharged.

If you manage a business, creditors might inquire about its operations with a specific interest in the company’s revenue and current debts. They will analyze if the company possesses any that could support debt recovery. On the other hand, the trustee will look into whether you meet legal obligations, including submitting all necessary paperwork and completing credit counseling. Breaching these responsibilities might expose concerns leading to the possibility of disposal of your case.

4. Failing to Pay the Required Chapter 13 Plan Payments

In Chapter 13 bankruptcy, you must follow through on your repayment plan. As soon as you miss these payments, the court will likely dismiss your case. Unpaid installments reveal that you are not honoring your plan, and the court can remove the protections bankruptcy offers. This means the creditors can restart collection efforts, leaving you with unresolved debt.

The bankruptcy process includes measures for creditor protection along with a way to support your financial goals. In a Chapter 13 bankruptcy case, the repayment plan provides a straightforward method for creditors to receive timely payments. Mishandling your repayments puts both the creditors and the reliability of your bankruptcy at risk. The courts consider these infractions as evidence of a lack of resolve to the pledged arrangements.

5. Neglecting Ongoing Obligations

While in bankruptcy, your duty to pay child support and alimony should continue unabated. Failure to keep payments current might initiate the dismissal of the case. As you pursue relief for other debts, the court prioritizes alimony and child support payments. It, therefore, expects you to stay on top of them. Neglecting these obligations increases the chances of losing your bankruptcy case.

6. Dishonesty or Fraud

Honesty is crucial for bankruptcy lawsuits. The court needs your complete financial details to evaluate your case and decide if you qualify for debt relief. That is why fraudulent activities are grounds for dismissal. In bankruptcy cases, fraud can take multiple forms, including:

• Concealing assets
• Falsifying information, including misrepresenting income and misstating debt figures
• Undervaluing assets, which is deliberately changing the assessed value of your assets to safeguard them from creditors
• Transferring assets involves transferring assets to friends or family in the days leading up to bankruptcy. Doing so is an attempt at concealing the actual ownership of the assets
• Failing to complete the credit counseling and debtor education programs

If you commit fraud, a dismissal is the least of your worries. You could face criminal charges for your fraudulent actions. The severity of the charges and the potential penalties depend on the fraudulent activity you engaged in. However, with criminal cases, you will have to seek the assistance of a criminal defense attorney.

7. Failing the Means Test in Chapter 7 Cases

Your Chapter 7 bankruptcy case is only successful if you pass the means test. This test evaluates your income to determine if you are eligible for a discharge under Chapter 7 or if you should file under Chapter 13 instead. If your income surpasses a specified threshold, the judge could dismiss your case or move it into a Chapter 13 repayment plan. Complying with income thresholds to escape dismissal in Chapter 7 proceedings is important.

8. Making Preferential Payments

Treating certain creditors better than others before the bankruptcy application might be regarded as dishonest. The court may consider this a maneuver aimed at preferencing particular creditors over the rest, causing a dismissal. Typically, the law limits preferential transfers to 90 days before filing for bankruptcy for specific creditors and up to one year for insiders, including family members and business associates. Choosing specific creditors alters the orderly settling of debts aimed at by the bankruptcy proceeding. These behaviors are perceived as attempts to manipulate the system.

Furthermore, these payments generate considerable issues about your intention. Choosing particular creditors to defraud others or hide assets can result in serious legal penalties. The courts analyze these behaviors thoroughly, and if it appears that you prefer specific creditors, the judge will likely dismiss the case. The court could find that you did not meet the legal requirement for seeking debt relief.

Reopening a Dismissed Bankruptcy Case

Reviving a previous bankruptcy case is possible, but you must address and resolve the issues that caused the dismissal. The process begins by filing an ex parte motion. This motion allows you to request reinstatement without a hearing. This quick method works well in clear and simple circumstances.

A common reason for dismissal is failing to file a credit counseling certificate, which is necessary to avoid dismissal. This is a requirement under bankruptcy law. It is important to fill out this counseling before filing. However, if you overlooked it, you must attach the certificate with your motion as a sign of your commitment to comply with the legal obligations.

Inaccuracies when stating assets or creditors provide another reason for a dismissal. As already discussed, you should provide accurate disclosures of your financial position. It is possible it was an honest mistake. If so, your motion should include detailed information on omitted assets and creditors. This detailed information helps the court understand your actual financial circumstances. You should outline the events that caused these omissions. Doing so will allow the court to view your situation favorably.

Can You Still Convert to Chapter 13 After a Dismissal?

Turning your Chapter 7 bankruptcy into Chapter 13 presents a critical chance to retake charge of your finances after a dismissal. After your Chapter 7 case is dismissed, you can apply to switch to Chapter 13. With a Chapter 13 change from Chapter 7 bankruptcy, you take a more proactive role in managing your debts.

You need court approval for the conversion and typically receive it unless there is evidence of bad faith or other significant problems. The judge evaluates your intentions and finances thoroughly. However, your request will only succeed if you act in good faith.

You must show a consistent income to change to Chapter 13. Chapter 13 hinges on your potential to repay creditors with this income because repayment is a fundamental element of the court-approved plan. If you have inadequate income, you will not meet the criteria for the conversion, and the court will reject your application. The court verifies your financial status to ensure you can follow through with the required payments from your proposed plan.

An important feature of Chapter 13 is the protection of nonexempt property. Chapter 13 allows you to keep essential items, including your car or home, as long as you pay what you owe. With its valuable asset-safeguarding ability, Chapter 13 represents a compelling alternative for people aiming to maintain important resources.

Once converted, you should draft a comprehensive repayment plan detailing how to repay some of your debts in three to five years. The court will check and endorse this plan to confirm it favors your lenders. Meeting the plan's requirements will allow you to pay off your outstanding debts while allowing you to start over financially and protect essential assets.

Find a Bankruptcy Attorney Near Me

Deciding to petition for bankruptcy can be extremely hard with a case dismissal. Should the courts dismiss your bankruptcy case, you will have unresolved debt and an unsettling sense of uncertainty. This makes an already stressful situation even more complicated. However, a dismissal does not close all doors.

You can explore other alternatives, and you need an experienced bankruptcy attorney to help you with this at San Diego Bankruptcy Attorney, we are ready to help. Our skilled team will assist you in choosing the best path based on your financial goals. We will help you maneuver the complexities involved in bankruptcy to help you secure a favorable outcome.

Call us today at 619-488-6168 for a free case evaluation. We will examine your present circumstances and advise you on the best approach to helping you get back on track.