Why Your Chapter 13 Bankruptcy Was Dismissed (And How To Avoid It)

chapter 13 bankruptcy dismissalFiling a Chapter 13 bankruptcy can feel like a brand new world. Unless you do your share, it won’t last for long.

Each month, thousands of people from around the country look to the bankruptcy court to stop a foreclosure, forestall a repossession, or simply to help reorganize their finances.

The beginning of the process involves a flurry of activity – filing a proper Chapter 13 Plan, stripping off liens, jettisoning some assets and resolving issues with the Chapter 13 trustee, judge and creditors.

The goal of most Chapter 13 bankruptcy cases is the same – curing a default, catching up arrears, and discharging certain obligations after a repayment plan is completed.

If you’re going to make this happen, you’ve got to be sure to stay clear of the issues that lead your Chapter 13 case to be dismissed.

Dismissal Is Not A Good Thing

First, a moment of clarity for you. When your get your discharge, that means you have completed your bankruptcy and certain unpaid debts are wiped out. You are no longer personally liable for repayment of those debts, though long-term debts secured by a lien remain enforceable.

In contrast, we have the dismissal. When your case is dismissed, you’re thrown out of court for one reason or another. You are right back where you started from before your bankruptcy was filed. If you file again, some of your protections may be limited.

Discharge is good. Dismissal is typically not very good.

Why Your Chapter 13 Case May Be Dismissed

In general, a bankruptcy case is dismissed when you don’t do something you needed to do. These things don’t happen on their own, after all. Some of those reasons include:

  • you failed to make the payments required under your Chapter 13 Plan;
  • you didn’t show up for a court hearing;
  • you failed to file a plan, together with a certificate of service, before the first scheduled meeting of creditors
  • a motion was filed against you in bankruptcy court and you didn’t respond; and
  • you failed to provide documents required by the trustee.

All Hope Is Not Lost

If your Chapter 13 case is dismissed, you may be able to reinstate your Chapter 13 case. This will restore your original case to where it was before the dismissal, but there are time deadlines and requirements to getting this request approved.

Even if you can’t get the original case reinstated, you may be able to file a new Chapter 13 bankruptcy. Some of your protections may be limited and things may not be perfect, but for many people this remains an option that can help you end your bill problems.

Image courtesy of Robert S.Donovan