18 Feb Chapter 13 Bankruptcy: What Happens If I Cannot Complete My Chapter 13 Plan (Part Four)
A debtor has the right to dismiss his Chapter 13 bankruptcy at any time provided that the case has not been previously converted from another chapter.
Generally speaking, the dismissal puts the debtor and his creditors back at square one: just as if the case had never been filed.
However, there are some benefits that can be gained from even a dismissed 13:
- During the time that the stay in the 13 was in effect, the debtor has been able to remain in their house. The 13 stopped a foreclosure that would have forced the debtor to move out of the house sooner.
- Because the stay in the 13 can stop a foreclosure, in many states it can take several months for a creditor to gear up to bring a house to foreclosure again, allowing the debtor a little bit more tim in the house.
- To the exent that payments were made to secured debt that was in arrears, the payments may have been enough to bring the arrearage current even though the bankruptcy was ultimately dismissed.
- Even if arrearages weren’t paid in their entirety, the payments to a secured creditor may have been enough that the creditor is willing to discuss modification of the loan or other options for repayment of a loan.
- If the 13 was filed to address priority debt such as back due taxes or child support, enough payments may have been made to bring those debts current.
A dismissal may also be an option if it appears that the Chapter 13 bankruptcy may be involuntarily converted to a Chapter 7.
The decision to dismiss a bankruptcy should not be made in haste.
One of the benefits of any bankruptcy is the stay of collection proceedings. If a case is dismissed and refiled within one year, the automatic stay only remains in effect for 30 days. To maintain the stay for a longer period of time, it is necessary to seek permission of the Court and to overcome possible objections by creditors.
Consult with an experienced bankruptcy attorney to discuss all of your options.
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