Most debtors filing for Chapter 7 bankruptcy protection discover the process moves along smoothly once the paperwork has reached the court. The bankruptcy system operates efficiently in most instances, and the filer has the fresh start they desired.
But sometimes the court will dismiss a bankruptcy petition. A dismissal is uncommon but can happen, and everyone should know how to avoid this concern.
What Is Dismissal?
The court can terminate a bankruptcy case for a variety of reasons. The dismissal of the case puts the filer back into the same financial situation they were before they desired to seek help from the court. Any foreclosures, repossessions, and debt collection methods underway at the time of the filing will resume as the creditors receive the notice of the termination.
The possibility even exists that the filer could lose their nonexempt property when a case is dismissed. The court can order the property go to pay the debts owed to creditors. The loss leaves the individual still responsible for the rest of their debts but without their property. There are many mistakes filers make that can lead to a dismissal.
What Are the Reasons for Dismissal?
The court looks at a number of factors before deciding to dismiss a petition, including:
- The debtor took on a large amount of unsecured debt before filing bankruptcy.
- The paperwork for the case was not filed with the court on time.
- The debtor failed to attend the meeting of the creditors (Section 341 meeting).
- The debtor did not bring the required identification to the Section 341 meeting as ordered.
- All debt management courses were not completed as ordered.
- The filer claimed someone a debt that belonged to someone else or failed to list all their debts.
- The debtor transferred the ownership of their property to someone else immediately before filing.
- The income tax returns of the debtor for the most recent year were never filed.
- The debtor failed the means test by having too much disposable income.
- The filing fees with the court were never paid.
- The debtor chose to meet with, or make agreements with creditors after they filed.
Any number of these reasons could result in the dismissal of your Chapter 7 petition.
Because you do not want your bankruptcy dismissed, you need to make sure you work with an experienced attorney, such as Peter Behrmann to make sure none of these examples happen to you.
Am I Able to Refile?
The court may order a dismissal without prejudice. Usually, the cause of this dismissal is a simple mistake like a missed deadline, or the forms submitted contained unintentional errors. The debtor can file again for bankruptcy protection immediately in this instance. Filing again as soon as possible will ensure an automatic stay on the debts so the property remains secure.
During the second filing, the automatic stay is good for only 30 days, but an extension is possible if it is requested before the first stay expires. If the debtor has had more than one dismissal of their case in a year, the filer will not have an automatic stay when they file again. The debtor must file a request with the court to receive a stay.
Could I Be Prevented From Filing?
A dismissal with prejudice means the case was dismissed due to bad faith. The court may believe the debtor attempted to commit fraud or was willfully lying in some manner about their debt or assets. The court will choose to either bar the debtor from any new bankruptcy filings for a period of time or make them permanently unable to file.
Can I Cancel My Petition?
The debtor can sometimes ask for dismissal after a filing. The court will only approve the dismissal if there is good cause. The details of the case and how the dismissal affects the creditors also apply. The court may refuse the dismissal request if the debtor cannot repay the creditors.
At Phoenix Law, we understand the stress caused by debt problems and the possibility of bankruptcy. We work with our clients and consider all options. Avoid the mistakes that can lead to delays and other complications, and get help now. Schedule an appointment today so we can review your case.