When it comes to the subject of bankruptcy, most will have questions about filing for Chapter 7 or Chapter 13- more on the topic here. Few will have questions about the actual responsibilities associated with being approved for such protections. Those who fail to hold up to their end of the bankruptcy hearing can face the dire situation of a bankruptcy dismissal. If this occurs, then a great many problems might quickly emerge.
Bankruptcy Dismissal: Details and Consequences
Filing for bankruptcy may very well give someone a completely new financial lease on life. Depending on the particular category of bankruptcy one files, unsecured debt may be discharged and/or the terms of repayment might be completely restructured. This is not to suggest that bankruptcy comes without any major problems or complexities. There are very definitive rules in place once the court has approved your bankruptcy petition. If you fail to follow along with these rules, then the possibility of a dismissal arises. For some, this may be fine. For others, major financial and legal troubles immediately arise.
The court outright dismisses the petitioner from bankruptcy protection. This is not to be confused with being discharged from bankruptcy. A discharge means you have completed all terms of the agreement and bankruptcy protection is no longer necessary. For example, there may be a remainder of debt that has to be paid as part of the agreement. Once you have paid off this debt, you would no longer require the help of the bankruptcy court since no outstanding money owed exists.
The Decision Could Be Yours
Bankruptcy dismissal may be voluntary or involuntary. By voluntary, it is meant the petitioner requests the court to dismiss the bankruptcy. The petitioner may do this because he/she feels that entering into bankruptcy was a bad idea or was based on poor legal or financial advice. Others may simply find their income increasing significantly allowing them to pay off their debts in a reasonable amount of time and without undue hardship. In having the bankruptcy dismissed, the specter of filing for bankruptcy no longer seriously impacts a credit history.
Do not assume, however, that a voluntary bankruptcy dismissal will be automatic if you are in Chapter 7. With Chapter 13 bankruptcy, there is a specific form to file to request a dismissal and, once the form is filed, the request for a dismissal should be quickly granted. Cessation of making payments to the bankruptcy trustee may further facilitate this outcome. In Chapter 7 bankruptcy, however, the courts will render a decision as to whether or not the bankruptcy may be dismissed. If the court rules against the petitioner, then he/she must continue to abide by the rules of the court.
Involuntary bankruptcy dismissal refers to when the petitioner has failed to live up to the terms of the bankruptcy. There are several reasons why a bankruptcy might be dismissed from the court. Failure to file forms, the inability or refusal to make certain required debt payments, attempts to take out loans when prohibited by the courts, and so on.
Probably the most serious of involuntary bankruptcy dismissals would be when the court finds evidence of bankruptcy fraud. Needless to say, bankruptcy fraud is illegal and those who commit can face felony charges resulting in jail time.
What To Do Afterwards
No matter what the reason maybe for the bankruptcy was dismissed, the minute this occurs, all stays with the creditors are voided. In other words, they can once again resume collection action which may include filing civil suit to recoup any debts owed.
Those who have suffered a bankruptcy dismissal can file a further petition to have the bankruptcy reinstated. The chances of whether or not the dismissal will be reversed is going to be based on the circumstances surrounding the dismissal. Reversing a dismissal based on a clerical error is going to be easier than trying to disprove claims of fraud.
Solace can be taken by those who cannot get their bankruptcy dismissal from being reversed. It is acceptable to file for bankruptcy protection a second time if the first was dismissed.