What Happens if My Chapter 13 Is Dismissed?

Posted by & filed under Chapter 13 Debt Relief.

When you file for a chapter 13 bankruptcy, you may think the hardest part is behind you. Unfortunately, simply filing bankruptcy is no guarantee that you’ll be granted the relief that comes with it. In fact, until the court reviews and approves it, filing a chapter 13 is just a preliminary step.

There are a number of reasons your chapter 13 bankruptcy could be dismissed by the courts. If you committed some type of fraud—even if it wasn’t intentional—your case will almost always be dismissed outright. A petition for bankruptcy that leaves out any of the required schedules or forms will also get dismissed and the same goes for if you don’t pay all the fees required.

Even if you don’t make any of the above mistakes, filing your chapter 13 is no guarantee that your relief will last. Once your plan is approved and filed, you’ll be expected to make ongoing—usually monthly—payments in order to reimburse qualifying parties (i.e. your creditors). If you fail to stick to this plan, you can expect your bankruptcy to get dismissed.

No matter what the reason was for your bankruptcy being dismissed, your situation now returns to what it was prior to filing. Literally, whatever was happening at the time is now back in play. So, for example, if you declared bankruptcy amidst a foreclosure, your house was protected as soon as you declared bankruptcy under the automatic stay. However, now that your bankruptcy was dismissed, the bank has every right to initiate procedures again—and they usually do. Obviously, the same would go for someone who was having their car repossessed.

Worst of all, the dismissed bankruptcy will still show up on your credit history. So you get the new challenge of an inferior credit rating with none of the benefits that come from getting relief.

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