Getting approval for a discharge of your unsecured debt through bankruptcy court is a significant step. If you filed for chapter 13 bankruptcy with the help of your bankruptcy attorney, this article will be beneficial to you, as it explains what happens to a Chapter 13 case when it is dismissed.
Chapter 13 bankruptcy is one of two main forms of bankruptcy. It is the more common one, as it sets you to repay your debt at a fraction of the actual value that you owe. A Chapter 13 bankruptcy petition will help reduce your total debt and give you the opportunity to repay a credit card company or other unsecured creditors. However, it typically takes between three and five years before the case is actually closed.
Why Do Chapter 13 Cases Get Dismissed?
It’s possible to receive approval from the court for your Chapter 13 case, but in the middle of your proceedings, your Chapter 13 bankruptcy case gets dismissed. A dismissed bankruptcy case can happen for many reasons. Some of the most common ones include the following:
- You failed to pay your court filing fee
- You failed to attend the meeting of your creditors
- You failed to attend your financial management course
- You failed to file all of the necessary bankruptcy forms
- You failed to file your tax returns
- You failed to make your payments on time to the bankruptcy trustee
Other reasons for dismissing a Chapter 13 case can include a voluntary dismissal.
Benefits of voluntary dismissal of Chapter 13
You can choose to voluntarily dismiss your Chapter 13 bankruptcy case at any time throughout the proceedings.This can be useful in different situations, but it does mean you will owe the entirety of your debt to all of your creditors. In some situations, this might be a tactical decision through your attorney-client relationship. This decision might be made because you want to file a new case to stop a foreclosure, so you have to voluntarily dismiss the current case.
What Happens After a Chapter 13 Case is Dismissed?
There are plenty of life changing situations that can occur during the span of your repayment plan, such as getting laid off, falling ill, injured, or getting demoted at work. Losing your income can produce serious complications, but it doesn’t mean that your case is over. In these situations, you and your attorney may decide to petition the court to allow you to pay back less of the debt than originally agreed upon. It’s also possible to petition for voluntary dismissal and refile for a different repayment plan.
Once a case is dismissed, the court views it as though it never existed. The automatic stay that was in place to prevent creditors from coming after your asset will be terminated, which means they can start sending you collection letters again, attempt to garnish your wages, repossess your assets, or foreclose on your property. Penalties and interest that would have otherwise been charged but wasn’t due to the bankruptcy case might be retroactively applied to your debt. However, you can still make full and timely payments to handle your remaining debt and then refile your Chapter 13 petition later if necessary.
How do I know when my Chapter 13 Case is over?
Chapter 13 helps you with your personal liability by setting up a repayment plan from debts incurred prior to the start of your bankruptcy case. This allows you to catch up on other secured debt, such as a car payment or a mortgage payment. Once you successfully file for Chapter 13, a trustee is in charge of your case. Rather than giving them your assets to sell in order to repay your debt, you will need to make regular payments to your trustee over the span of that three to five year timeframe. The trustee then sends payments to your creditors.
Discharge of chapter 13 trustee and order closing case
The court will provide a discharge order after your payment plan has been completed and your agreed-upon debts have been repaid. This means if your plan is five years of repayments, once the trustee has distributed those repayments for the total five years and filed a report with the courts, the bankruptcy court then enters a discharge order. This order discharges any remaining balance for the debt that was included in your repayment plan. After that, the case is closed.
How do I know when my chapter 13 is Case over?
You know when your Chapter 13 case is over when the court actually closes it. You may get the information from the trustee or get a letter in the mail.
Can I Refile Chapter 13 After My Case Is Dismissed?
In some circumstances, someone involved in your bankruptcy case may be able to ask the court to revoke the discharge within one year of your debts being discharged and your case being closed.This can only happen under specific situations. For example, if you obtained your bankruptcy discharge through fraud and that fraud wasn’t discovered until after the Chapter 13 discharge was granted, this can be grounds for revoking your discharge. This type of fraud typically involves t failing to disclose all of your income, hiding assets, or you lying on your bankruptcy petition.
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After that, you can focus on other personal liability, such as debts incurred since the time your bankruptcy petition was filed. It’s also a good idea to learn how to rebuild your credit moving forward. Your bankruptcy case will show up on your credit report for seven years, so as time passes, the impact of this bankruptcy will diminish. You won’t be able to obtain a new loan for a mortgage for several years, but you can start improving your credit score and learn to manage your finances so you can avoid having to file for bankruptcy again. One way to do this is to obtain a secured credit card with a very low limit, or open an account at a credit union. When you have a secured credit card, you give the company cash, and you can only spend the amount that you have. It’s essentially a debit card, but it acts as a credit card in regard to your credit score. On-time payments will be reported, so this will help you build your credit back.
Depending on where you reside and your particular circumstances, you may be permitted to refile Chapter 13 or Chapter 7 a number of years after your case was dismissed. This length of time varies based on where you live, so it’s essential to talk to an experienced bankruptcy attorney for assistance.
Ultimately, there are many factors that can impact the course of your Chapter 13 bankruptcy petition. You can do everything right and then fail to submit one form or fail to attend one meeting and have your case dismissed. You might have a great repayment plan and then find that your life circumstances have changed. There are many reasons for dismissal, and if it does occur, you can refile your case. Once your agreement has been completed and the trustee has reported this completion to the bankruptcy court, you will receive notification that your case has been closed. At this point, your remaining debt will essentially be erased, and you will have an opportunity to move forward financially.