There are various reasons for Chapter 13 dismissal, including payments are too high, unemployment, illness, or financial hardship. If you’re at risk of having your Chapter 13 case dismissed, it’s important to understand the consequences and evaluate all of your options. You should always enlist the help of a trusted bankruptcy attorney to ensure you don’t make any decisions that could negatively affect your future.
Why Was My Chapter 13 Case Dismissed?
Typically, bankruptcy cases are a 60-month commitment. Some individuals might qualify for a 36-month plan. Many things can happen over this period, and there are various reasons your Chapter 13 case might get dismissed, including:
- Voluntary dismissal — Since a Chapter 13 case is a voluntary repayment plan, a debtor can quit at any time.
- Missed Chapter 13 payments — You must pay your Chapter 13 payments on time except for extreme hardship. In this case, most bankruptcy attorneys will allow for a three month suspension of payments. However, the reason for these cases are examined very closely before granting a debtor this grace period.
- Failed to attend hearings — The court may dismiss your case if you fail to attend any of your Chapter 13 hearings.
- Failure to complete bankruptcy courses — You’re required to complete two bankruptcy courses in Chapter 13. If you don’t complete them, the court may dismiss your case.
- Failure to file required tax returns — You must file all mandatory tax returns on time for your bankruptcy case to be eligible.
- Failure to file all bankruptcy courses — You must complete all required bankruptcy forms or your case may be subject to dismissal.
- Failure to submit required documents to the Chapter 13 trustee — Some additional documents might be required. If you fail to submit these to the Chapter 13 trustee, your case could be dismissed.
- Failure to meet deadlines — There are various deadlines that you must meet in Chapter 13. Failure to do so can result in case dismissal.
What Is the Difference Between Bankruptcy Dismissal vs. Discharge?
Bankruptcy dismissal occurs when you fail to meet any of the requirements of their case. The bankruptcy court will provide you with notice and grant you a period to fix the mistake. If you don’t fix it within their given time frame, your case will be dismissed. On the contrary, a bankruptcy discharge is when you’re relieved of a large sum of your debts. In turn, the creditors can’t sue you or attempt to collect those debts again in the future.
How Does a Chapter 13 Dismissal Refund Work?
Any money that’s undistributed to creditors is returned after a Chapter 13 dismissal. However, before they can return the money to you, the Chapter 13 trustee must file a detailed report with the court. At this stage, the trustee has the right to deduct any administrative fees from the remaining sum before returning the money. Additionally, your bankruptcy attorney can claim any unpaid professional fees, and your case may be subject to wage garnishment or an IRS levy.
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 case’s dismissal. If you’ve 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 you’re within the income limits. In this case, you’ll 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 you’re 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 can’t find comparable work for a while. However, you might be at risk of other things if you convert, such as losing your property because you’re behind on our mortgage payments or if you have a property that can be liquidated by the Chapter 7 Trustee. Therefore, it’s essential to weigh all of your options upfront before making any decisions that could affect your financial future.
Middle Tennessee’s Top Bankruptcy Attorneys
Navigating the bankruptcy process can be daunting. Enlisting the help of a trusted attorney is invaluable and will ensure a smoother process.
Flexer Law has been serving the legal needs of Middle Tennessee residents since 1981. Our experienced bankruptcy attorneys will work diligently on your behalf to provide the best financial outcome for you.
We have three office locations throughout Middle Tennessee to accommodate your legal needs. Contact us for a free consultation, and we’ll find the best solution to get your financial life back on track.