There are several reasons that a bankruptcy case can be dismissed. The Bankruptcy Code allows most dismissed cases to be re-filed at any time, and most importantly – the debts that were included in the original case are not barred from discharge.
It’s important to note – once a bankruptcy case is dismissed, the automatic stay ends immediately, which means creditors are allowed to renew their collection attempts. Any liens or transactions avoided by the bankruptcy case are also reinstated.
It’s important to have an experienced bankruptcy attorney in your corner to help navigate the complicated waters of bankruptcy law. We always help our clients understand every aspect of their bankruptcy case, including what happens if their case is dismissed.
Bankruptcy cases can be dismissed by choice, or involuntarily. If you file for bankruptcy, but then fail to do something that’s required by the Bankruptcy Code or the bankruptcy court, your case will be involuntarily dismissed. Let’s say you’re a Chapter 7 debtor – if you don’t attend your 341 meeting of creditors, your case will be an involuntary dismissal. If you’ve filed for Chapter 13, and you don’t make your monthly payments to the trustee, you’ll also have an involuntary dismissal.
In some cases, a debtor might decide to voluntarily dismiss their bankruptcy case. Most of the time, this happens when someone files for bankruptcy and then incurs a large debt. For example, if you were to file bankruptcy, and then shortly thereafter you racked up a huge medical bill, you could dismiss your case voluntarily so that you could re-file and include the new debt.
Typically, if this were to happen to you, you’d want to ask the court’s permission to dismiss the case – but sometimes debtors will simply intentionally skip a required act to cause an involuntary dismissal.
You shouldn’t take intentional dismissal lightly. There are a few cases where the Bankruptcy Code disqualifies the debtor from re-filing for 180 days. If the case is voluntarily dismissed after the creditor requests relief from the automatic stay, then the debtor cannot file for 180 days. If a creditor is aggressive enough, a quick filing for relief from stay could disqualify the debtor from filing for 180 days – which is plenty of time to foreclose, garnish wages, or obtain a judgement.
The other situation that would lead to a 180 day lock-out is when a case gets dismissed because a debtor willfully fails to appear before the court or abide by the orders of the court. Usually, this means a debtor fails to attend the 341 meeting, a court-ordered deposition, or a court hearing. Creditors and trustees have the ability to challenge a debtor to try to prove that they willfully failed to abide by the court.
Dismissing a bankruptcy case should really be a last resort – and it should always be at the advice of your bankruptcy attorney. If you have any questions about bankruptcy cases, please call us at 214-760-7777, and our experienced attorneys will answer your questions and walk you through all of your options.