What Happens When a Chapter 13 Case Is Dismissed?

When a Chapter 13 bankruptcy is dismissed, your case ends without any debts being discharged. You lose the protection provided by the bankruptcy court. Creditors can start or resume collection activities against you. Wage garnishments, lawsuits, and foreclosure proceedings can all begin again.

Payments you made toward your Chapter 13 repayment plan won’t be refunded. Your debts will revert to what you owed before filing. Any payments made during the case are subtracted from that amount.

The dismissal will appear on your credit report. Your credit score can drop significantly. You can usually file for bankruptcy again, but restrictions may apply depending on why your case was dismissed.

The bankruptcy court can dismiss your case if you fail to meet requirements. You can also request voluntary dismissal if you decide to quit the Chapter 13 plan yourself.

Chapter 13 Bankruptcy Basics

When you file for bankruptcy under Chapter 13, you propose a repayment plan for your debts. You make a monthly payment to a Chapter 13 trustee. The trustee pays your creditors according to the terms in your plan.

The amount of your monthly payment depends on several factors. Only certain debts may be paid directly to creditors while your case is open. Mortgages are one example of debts that might be paid directly.

Chapter 13 bankruptcy cases typically last 3-5 years. If you successfully complete your case, any remaining unpaid debt is eliminated. The bankruptcy discharge wipes out qualifying debts at the end.

Why Do Chapter 13 Cases Get Dismissed?

Chapter 13 cases most commonly get dismissed when the filer fails to meet requirements. You must complete specific tasks to keep your case active.

Common Reasons for Dismissal

• Failing to pay the required court filing fee
• Missing the required 341 meeting of creditors
• Not completing required credit counseling courses
• Failing to submit a certificate of completion to the court
• Not filing all required bankruptcy forms
• Proposing a plan that doesn’t comply with bankruptcy law
• Missing required monthly payments under the Chapter 13 plan
• Not meeting deadlines set by the court
• Failing to submit required documentation to the trustee
• Not filing tax returns or submitting copies to the trustee

Chapter 13 cases often get dismissed when someone doesn’t meet requirements set by bankruptcy rules. Sometimes, a case gets dismissed for reasons outside of your control.

For example, if you lose your job or face a serious illness, making payments might become impossible. If you can’t adjust the plan payments or convert the case to Chapter 7, dismissal may be unavoidable. Speaking with a bankruptcy attorney for free can help you understand your options.

Can I Refile Chapter 13 if My Case Is Dismissed?

Whether you can refile depends on why your original case was dismissed. If your case was dismissed because you didn’t meet certain requirements, you might be able to file again right away.

If you’ve had multiple bankruptcy cases in a short time frame, the court might prevent you from filing a new Chapter 13 case. A specific waiting period may be imposed.

Even if you’re allowed to refile, your automatic stay might be limited. The court order that stops creditors from collecting on your debts may not apply at all in your new case. Your protection from creditors while your case is pending could be affected.

Can I Convert My Chapter 13 to Chapter 7 to Avoid Dismissal?

You might be able to convert your Chapter 13 case to a Chapter 7 case to avoid dismissal. Converting to Chapter 7 could be an option if you can’t keep up with payments. Significant changes in your financial circumstances may also make conversion appropriate.

To qualify for Chapter 7, you’ll need to pass the means test. The test checks if your income is low enough to file under Chapter 7. If you’re eligible, converting your case can help you discharge most unsecured debts.

Credit card debt and medical bills are examples of unsecured debts that can be discharged. You can get a fresh start through Chapter 7.

Keep in mind that Chapter 7 doesn’t offer the same flexibility as Chapter 13. If you’re trying to keep secured property like a home or car, Chapter 7 may not work. You usually need to be current with secured loan payments to keep the property.

How Do You Convert Chapter 13 to Chapter 7?

The Bankruptcy Code allows you to convert a Chapter 13 case to Chapter 7 at any time. You file a notice of conversion with the court and pay a small conversion fee. In 2024, that fee is $25.

The fee is the difference between the original Chapter 13 filing fee and the Chapter 7 fee. Typically, the court won’t require a hearing. The process can be completed quickly.

Consult with a bankruptcy attorney first to make sure this is the right choice. A free consultation can help you understand the implications.

Can Anyone Convert From Chapter 13 to Chapter 7?

Not everyone can convert to Chapter 7. You must be eligible under Chapter 7 rules. Passing the means test shows that your income qualifies.

If you received a discharge from a previous Chapter 7 case within the last eight years, you won’t be eligible. You must wait until that period has passed.

If you’ve already converted your case once before, you may need special approval. The court must approve a second conversion.

Can I File for Chapter 7 After My Chapter 13 Is Dismissed?

Yes, you can usually file a Chapter 7 case after your Chapter 13 case is dismissed. There are some important things to consider first.

You’ll need to meet the income requirements for Chapter 7. Passing the means test shows that your income is low enough to qualify. You’ll also need to make sure that bankruptcy exemptions can protect all your property.

Losing property isn’t typically an issue in Chapter 13. It can be a risk in Chapter 7. Understanding exemptions is crucial.

Timing is another factor to keep in mind. In many cases, you can file a Chapter 7 bankruptcy immediately after your Chapter 13 is dismissed. However, if your Chapter 13 was dismissed for not complying with court orders, restrictions may apply.

Filing multiple cases in a short time frame can lead to restrictions. The court may place limits on how soon you can file another bankruptcy case.

The automatic stay might be limited or not go into effect. If you’ve had multiple bankruptcy filings within a short period, creditor protection may be reduced.

Which Is Better: Chapter 7 or Chapter 13?

Everyone’s financial situation is different. You’ll have to decide for yourself whether Chapter 7 or Chapter 13 is better. If you qualify for Chapter 7 bankruptcy, it has many perks.

Chapter 7 is much faster than Chapter 13. Most Chapter 7 filers see their debts discharged in six months or less. By contrast, Chapter 13 can take up to five years.

Chapter 7 also has a higher success rate than Chapter 13. The 3-5-year repayment plan required in Chapter 13 cases is challenging. A lot can change in that time frame.

Many people struggle to stay committed to a strict budget. The required repayment plan is difficult to maintain for that long. It’s also easier to file Chapter 7 successfully without hiring a lawyer.

Chapter 13 can be a good option if you have secured debt you’re trying to catch up on. A mortgage or car loan can be folded into the required payment plan. If you can stick to the multiyear repayment plan, you may be able to catch up.

You can keep your home and eventually have your remaining unsecured debts discharged. Credit card debt is one example of unsecured debt that can be eliminated.

If you’re struggling with a Chapter 13 dismissal, speaking with a bankruptcy attorney can help you determine the best path forward.