Not all bankruptcy cases end in a bankruptcy discharge. For various reasons, some bankruptcy cases are dismissed prior to discharge. What happens after a bankruptcy is dismissed? Read on to learn more.
Some Bankruptcy Cases Are Dismissed
Bankruptcy can be very complicated. Not all debtors make it all the way through their bankruptcy to discharge. The bankruptcy court dismisses most bankruptcies. Other times, debtors themselves request that their bankruptcy case be dismissed.
Dismissal prior to discharge does not necessarily mean that the bankruptcy failed. A debtor may utilize a bankruptcy filing to delay a foreclosure or other legal event until such time that they can make other arrangements. This strategic use of the bankruptcy code is not explicitly forbidden, but is generally frowned upon. However, that does not stop it from happening. This is especially true in Chapter 13 court where a majority of dismissals occur.
Failing to file the required paperwork will also result in case dismissal. Occasionally the debtor does not show up to court when ordered. The bottom line is that not all cases end in a discharge.
What happens after a bankruptcy dismissal depends on the chapter under which the bankruptcy case was filed.
In Chapter 7 cases, the court will dismiss the debtor and the automatic stay will terminate. The court will likely close out the case fairly quickly thereafter.
In Chapter 13 cases, the court will dismiss the debtor and the automatic stay will terminate — just like in the Chapter 13. If the Chapter 13 plan was no confirmed, the Chapter 13 Trustee will refund any Chapter 13 payments received back to the debtor. If the Chapter 13 plan was confirmed, the Chapter 13 Trustee will wrap up the administration of the bankruptcy case and issue a final report to the court. The court will proceed to officially close the case once the Chapter 13 Trustee’s administrative duties are resolved. Timing here could be 30-60 days from dismissal to closure, depending on the circumstances of the case.
Important to remember: dismissal terminates the automatic stay! You may need to make alternative arrangements to protect property once your bankruptcy case is dismissed.
My office handles Chapter 7 and Chapter 13 bankruptcy cases in the Sacramento area. Please call us at (916) 333-2222 to schedule a friendly bankruptcy consultation.