Chapter 13: What If My Case Just Got Dismissed?

10 Nov Chapter 13: What If My Case Just Got Dismissed?

If your chapter 13 case was recently dismissed, is the situation truly hopeless? What if the chapter 13 was filed to catch up on past due house payments, or to avoid repossession of a much-needed automobile, or to stop a wage garnishment by the IRS? In these situations, the chapter 13 was probably a godsend; its dismissal is a financial calamity. What can the debtor do?

One idea is to pay your lawyer to petition the bankruptcy court to reinstate the case, based on the legal standard of “excusable neglect” by the debtor. This might take only a few hours of attorney time. If you can explain how the problem which resulted in dismissal of your case was due to excusable reasons, this could be the simplest remedy.

The next idea to consider is filing a whole new chapter 13 case, which is not as simple as it sounds. This is because the bankruptcy protection (known as the “automatic stay of actions”) expires after 30 days in a case filed within one year of a case which was dismissed, unless your lawyer immediately files a motion to extend the stay. Consequently, for such a new filing, your lawyer is likely to want an advance fee payment which is much bigger than normal. Also, to succeed in such a motion, your lawyer has to show that you won’t be likely to repeat the problematic conduct in the new case. It’s fair to say that many debtors can meet this standard, but it certainly chews up financial resources to allow chapter 13 cases to be dismissed, and the reinstate them or file new ones.

Some lawyers have experimented with the idea of filing a new chapter 13 case, and refraining from filing a motion to extend the bankruptcy stay, in cases where the debtor can’t pay for such a motion, and has approved of not filing the motion. This procedure relieves the debtor of the burden of paying for the motion to extend the stay, in the extreme case where the debtor can’t reasonably pay for the motion. It should be attempted only as a last resort because without the stay of actions, a creditor can proceed with foreclosure, repossession or garnishment. However, due to the technical, ambiguous, and confusing language of the bankruptcy law section at issue (11 U.S.C. section 362), many creditors have concluded that even without a motion from the debtor, the creditor can’t proceed against the debtor’s property, at least not without bankruptcy court permission.

If your case was dismissed and you really needed the protection it gave you, ask your bankruptcy lawyer if the above strategies can help you.

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Craig Andresen is a Minnesota bankruptcy attorney who represents both consumers and small business owners in chapter 7 and chapter 13 cases. With thirty years experience, Mr. Andresen is a frequent speaker on the topics of stopping mortgage foreclosures, and stripping off second mortgages in chapter 13. His office is located in Bloomington just across the street from the Mall of America. Call his office at (952) 831-1995 for a free consultation about protecting your rights using bankruptcy.
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