Dismissal Conversion & Closing Of A Bankruptcy Case What Are The Differences Between Them
A) Dismissal vs. Closing of a Bankruptcy Case — The main differences between dismissal and closing of a bankruptcy case involve discharge, ability to file another bankruptcy case, and the consequences of filing another bankruptcy case.
Closing does not mean that a discharge was entered unless all activities related to determining discharge have been completed. If a bankruptcy case is closed without a discharge because an individual debtor did not timely file a Certificate of Completion of Instructional Course Concerning Personal Financial Management, a debtor must file a Motion to Reopen the Case.
What To Expect Immediately After A Chapter 13 Case Dismissal
Perhaps the most important thing that happens when you file for Chapter 13 bankruptcy is the automatic stay. The stay takes effect immediately and prevents your creditors from taking any further debt collection actions against you. When your Chapter 13 case is dismissed, the automatic stay goes away.
That means your creditors can start pursuing your debts again. Depending on the nature and amount of your debts, that might include any of the following:
- Collection lawsuits
- Wage garnishment
- Asset repossession
Dismissal And Starting Over
Failing to respond to a motion to dismiss likely will result in a dismissal without prejudice, which allows a debtor to refile at any point. Until and unless you file again, you will lose the protections provided by bankruptcy, such as the automatic stay. However, if you have suffered a substantial financial blow and cannot convert to Chapter 7, this may be your only option if you cannot get a hardship discharge. You can file again as soon as you qualify for either Chapter 7 or Chapter 13. This will also involve filing a separate motion with the court to ask for an extension of the automatic stay, assuming that you file within a year of the dismissal.
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Can You Refile If Your Bankruptcy Case Was Dismissed
When you file for bankruptcy relief, you may be referred to as the petitioner or the debtor. Unfortunately, even if you have good reasons to file bankruptcy, there is no guarantee that your debts will be forgiven. For example, if you do not follow the proper procedures or neglect to comply with the bankruptcy laws, your case could be dismissed. A Chapter 7 bankruptcy case is rarely dismissed however, dismissal for a Chapter 13 case is rather common. The reason for the dismissal determines whether a case is dismissed with prejudice or without prejudice.
Voluntary Chapter 13 Dismissal
Dismissal of a Chapter 13 case isnt always a surprise sometimes, the filer may have reason to voluntarily dismiss a Chapter 13 case. It might be hard to imagine, but if your circumstances change, you might actually benefit from dismissing your own Chapter 13 case.
Heres an example: You are making your Chapter 13 payments as scheduled and keeping current on your mortgage, but you decide to move out of state and into your parents home. You no longer need your home, and the terms of your bankruptcy hold that surrendering your home to your creditors will settle up your debts. In such a case, requesting a dismissal of your case may actually make sense.
In other cases, you might know you are going to be unable to make your Chapter 13 payments as you have been. Perhaps you lost your job or experienced some similar change to your financial circumstances. You may be able to request a dismissal of your Chapter 13 case so you can take a different approach, such as Chapter 7 bankruptcy. Before you take any drastic action, its always a good idea to speak with your bankruptcy attorney to determine whether requesting a dismissal is right for you.
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What Happens To Chapter 13 Plan Payments If Case Is Dismissed
If your Chapter 13 case is dismissed, funds held by the Chapter 13 trustee that are not yet distributed will be returned to the debtor much like in a conversion situation. Chapter 13 payments if bankruptcy case is converted or dismissed are returned to the debtor. However even moreso than in a converted case, they are subject to levy by the IRS or state or local taxing authorities since there is no automatic stay like there is in a converted case. Likewise, it could arguably be subject to a writ of garnishment from a judgment creditor. It is rare that this would happen but it is possible. Lastly, an attorney with unpaid professional fees could seek approval for payment from these undistributed funds. Chapter 13 trustees in Arizona usually hold the funds for 30 days for any IRS levy or professional claim and if no claims are made, they are returned to the debtor.
If you have questions about bankruptcy including conversion from Chapter 13 bankruptcy to Chapter 7, call the Barski Law Firm at 602-441-4700. Our firm has handled hundreds of bankruptcy cases including numerous conversions from Chapter 13 to Chapter 7. We have the experience and compassion to help you.
Common Reasons For A Dismissal Without Prejudice
After filing your case, you must comply with the bankruptcy rules and procedures. The court dismisses most matters because of the failure of debtors to:
- file the correct forms with the court
- submit supporting documentation to the bankruptcy trustee
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Converting To A Chapter 7 Case To Avoid A Dismissed Chapter 13 Case
Depending on why youâre at risk of having your Chapter 13 case dismissed, you may be able to convert it to a Chapter 7 case. Most bankruptcy courts allow you to do so by filing a simple ânoticeâ and paying a small conversion fee.
Whether conversion is an option depends on your situation. For example, if youâre unable to stay in the Chapter 13 payment plan because youâve lost your job and itâs not looking like youâll be able to get anything comparable anytime soon, you likely qualify for Chapter 7 relief even if you didnât when the case was first filed.
Of course, you want to make sure that you will not have any other problems when converting to a case under Chapter 7 to avoid a dismissed Chapter 13 case. If youâre behind on your mortgage payments or have property with non-exempt equity, you could face losing this property in a Chapter 7 case.
Filing A Chapter 7 Case Without An Attorney
If youâre struggling to pay your debts, you might want to consider a Chapter 7 case before you file a Chapter 13 case. Depending on your financial situation, you might pass the Means Test for a Chapter 7 case. In a typical no-asset Chapter 7 case, you can eliminate your debts within four to six months after filing your bankruptcy petition with the bankruptcy court. For many filers, theyâre able to get rid of thousands of dollars in debt quickly without losing any of their property.
If this sounds like the debt solution you have been searching for, consider using Upsolveâs free filing tool. If you have questions or you are skeptical, watch video testimonials from our past users. You can hear from actual individuals who used our services to file a Chapter 7 case without an attorney to receive the debt relief they need.
If you need a fresh start but you canât afford to pay an attorney to help you file a Chapter 7 bankruptcy case, take ourscreener to see if you’re a fit for Upsolveâs free bankruptcy app. Upsolve gives individuals who cannot afford to hire a bankruptcy attorney the assistance they need to get out of debt. You can do this!
Check out the video below â¬ï¸ for more on what happens when a Chapter 13 case is dismissed!
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Need Help Contact Our Office Today
The best way not to get you Chapter 7 bankruptcy case dismissed is to go at it with a knowledgeable bankruptcy attorney. If you need to file bankruptcy and want it done right, contact us today to see how Walker & Walker can help. We make sure filing is done on time and correctly so you dont need to figure it out yourself.
What Happens When Your Chapter 13 Case Is Dismissed
If the Chapter 13 plan is dismissed, creditors may immediately initiate or continue with state court litigation pursuant to applicable state law to foreclose on the petitioners property or garnish their income. If a bankruptcy case is dismissed, the legal affect is that the bankruptcy is deemed void.
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Types Of Bankruptcy Dismissal
There are a number of types of dismissal, each with different consequences. Among them is dismissal with or without prejudice, voluntary dismissal, and dismissal for abuse. In many cases, as long the details of your petition were made honestly and in good faith, you can either reinstate a dismissed petition or file again right away.
Sometimes a voluntary dismissal is sought because ones circumstances change. Usually, this means you are able to pay back your debts and no longer need bankruptcy relief.
However, a request for voluntary dismissal isnt always granted. If your bankruptcy case was dismissed and you still wish to file, mistakes are not taken lightly. Anyone wishing to cheat the system could claim it was an accident therefore, many mistakes will be cause for a dismissal that cannot be reinstated.
Dismissals with or without prejudice imply that cases were either dismissed for a good reason, such as fraud or because of unforeseen circumstances or honest mistakes. A dismissal for abuse or with prejudice means the bankruptcy case can never be filed again.
After a waiting period, however, usually half a year, a new case can be filed. Issues related to types of dismissals can be very different, so a great deal depends on your own particular circumstances.
Can You Refile For Ch 13 After A Dismissal
Often times, you can refile for bankruptcy immediately after dismissal. That means going through the process again, hoping for a discharge. While declaring bankruptcy might offer debt relief, it does serious damage to your credit.
A ch 13 bankruptcy sinks your credit score by over 100 points & stays on for up to 10 years. Having poor credit affects your eligibility for qualifying for loans. The ones available often come with expensive high-interest rates. Luckily, you can start rebuilding your credit. The easiest way is w/help from a pro like Credit Glory.
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What Does It Means When A Case Is Dismissed With Prejudice
Whereas a case dismissed without prejudice can be refiled immediately, the opposite is true when a bankruptcy case is dismissed with prejudice. A petitioner whose case is dismissed in this manner may not re-file for a specific length of time or, in some cases, prohibited from ever filing bankruptcy on the debts that existed at the time of the initial filing.
Possible reasons that lead to a bankruptcy case being dismissed with prejudice include, the debtor:
- filed his or her case in bad faith to delay creditors
- tried to hide assets
- willfully disregarded orders from the court or
- abused the bankruptcy system in some other way.
According to bankruptcy law, a debtor whose case was dismissed with prejudice cannot file another bankruptcy case within 180 days of the prior case if:
- the debtor requested that the case be dismissed after he or she filed a motion for relief from an automatic stay or
- the debtor willfully failed to follow the courts orders.
Since bankruptcy judges are given far-reaching discretion when it comes to dismissing bankruptcy cases, he or she can determine the penalty the debtor receives based on the severity of the acts that led to the case being dismissed with prejudice.
Why Payday Loans Can Be Uniquely Problematic
While payday loans can be easy to get, financial experts strongly advise against them. The loans are problematic for several reasons.
Most traditional loans have a repayment plan of well over a month and the monthly payment is often tailored to your ability to pay. Payday loans, on the other hand, typically require full payment in 2-4 weeks. Thereâs a reason this causes many people to default. Most people take out these loans to deal with an emergency need for cash. The loan may address the emergency, but lifeâs other expenses are still there when the loan is due and it catches many people short.
Payday loans are also very costly debt. The fees add up quickly and have to be paid off when that next payday arrives. Many states are taking steps to restrict the fees, but theyâre still very high. While California caps the finance charge at 15%, a $300 loan payable in 14 days still has an APR of 391%!
If you canât pay off the loan, the ârefinancingâ options from lenders can be expensive. If allowed under state law, lenders may let you roll over your loan for an additional term. But theyâll likely charge new fees each time you do this, which can quickly double or triple your loan cost. And, of course, youâll continue to owe the principal amount as well.
What Are My Chapter 13 Options If I Face A Dismissal
If your case is dismissed, you might be eligible to re-file under Chapter 13, depending on the reason for your cases dismissal. If youve filed multiple bankruptcy cases within a short period, the bankruptcy court can deny your request to re-file right away. Since Chapter 13 is more complex than Chapter 7, navigating this process with a trusted bankruptcy attorney is recommended and worth the investment.
You also might be eligible to re-file under Chapter 7 if youre within the income limits. In this case, youll want to ensure that available bankruptcy exemptions protect all of your property. Additionally, you might be able to get rid of unsecured debts in Chapter 7 even if your Chapter 13 case was dismissed.
If youre at risk of having your Chapter 13 case dismissed and you act quickly, you might be able to convert to a Chapter 7. You can request to convert by filing a simple notice and paying a conversion fee. A common reason you might qualify for converting from Chapter 13 to Chapter 7 is that you lose your job and cant find comparable work for a while. However, you might be at risk of other things if you convert, such as losing your property because youre behind on our mortgage payments or if you have a property that can be liquidated by the Chapter 7 Trustee. Therefore, its essential to weigh all of your options upfront before making any decisions that could affect your financial future.
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You Can Be Denied A Discharge
if the Court determines that you committed any of the following acts:
- make a false oath, claim or account
- give or receive money for taking certain action or agreeing not to take certain action
- withhold books, records, documents or other records from the bankruptcy court
- You fail to explain satisfactorily any loss of assets or deficiency of assets to meet your liabilities
- You refuse to obey an order of the bankruptcy court, or refuse to answer a material question.
- You make too much money and need to switch to a Chapter 13.
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When Bankruptcies Are Dismissed
A dismissal could be at the request of the debtor when bankruptcy protection or a discharge is no longer needed.
Sometimes, we file a Chapter 13 to buy enough time to complete the sale of an endangered home. Once the sale is complete, there may be no further need for the automatic stay.
Generally a debtor cant voluntarily dismiss a Chapter 7 case. The debtor can convert the case to another chapter, but the debtor cant usually change his mind and escape bankruptcy.
More often, dismissal comes on the motion of the trustee or the court, often for failure to timely file a document or for abuse of the system.
But dismissed means that the case has been closed without a discharge.