Chapter 7 bankruptcy filings are majorly voluntary, and the requirements are usually straightforward. Hence, individuals who qualify can file for Chapter 7 bankruptcy to have most of their debts wiped out. Filing for bankruptcy generally helps put an end to their current financial woes, thereby granting them a fresh start. However, filing for Chapter 7 bankruptcy does not always mean that the court will grant you a discharge. Sometimes, your case might be dismissed, and your right to a discharge may be forfeited.
Can My Chapter 7 Bankruptcy Case Be Dismissed After Filing?
How Bankruptcy Saved My Family And How It May Save Yours
Dismissal of a Chapter 7 bankruptcy case usually closes the case before one can receive a discharge. It begins when a debtor, creditor, trustee, or any other party in interest files a dismissal request in court. Whenever your Chapter 7 bankruptcy case is closed, it follows that:
- The automatic stay ceases to be in effect
- You still bear the liability of the debts owed to your creditors
- You are released from bankruptcy (together with your bankruptcy estate)
However, debtors don’t have a right to dismiss their bankruptcy case, and the court won’t grant it and close the case simply because you requested a dismissal or another party requested to have your case dismissed. Whether the dismissal will be granted or not depends on various factors, including the motive for the request, the stage of the bankruptcy process you are in, and the impact of the dismissal on your creditors.
Voluntary Dismissal of a Chapter 7 Bankruptcy Case
Sometimes, debtors may want to dismiss their Chapter 7 bankruptcy case before a discharge has been granted. Such debtors may have received money and opted to pay their debts off rather than file for Chapter 7 bankruptcy. Another common reason for applying for voluntary dismissal is when debtors discover that some of their property won’t be protected under the state exemptions as thought.
Regardless of the reason, having a dismissal for your Chapter 7 bankruptcy isn’t easy – it would require you to have a good cause for the court to grant it. Financial advisors and bankruptcy attorneys warn debtors that they’ll have to complete the Chapter 7 bankruptcy filing process once they start. Working with a bankruptcy attorney can help you find an issue that amounts to a good cause, and you may have something to hold onto in your dismissal request.
The court’s decision to grant a debtor a voluntary dismissal may depend on the following factors:
- Whether the debtor is requesting dismissal in good faith
- Whether creditors have consented
- Whether the bankruptcy dismissal would lead to a prejudicial delay in payment
- Whether the dismissal would lead to a reordering of priorities
- Whether there is a pending preference claim, objection to exemptions, or objection to discharge
- Whether there exists another legal proceeding through which claim payments can be handled
In cases where there are funds in a debtor’s bankruptcy estate, or if the dismissal will cause a payment delay to the creditors, then the dismissal motion will most likely be denied. A court will not grant a dismissal simply because the debtor didn’t understand the consequences of the process. Even finding a way to pay off all your debts is not a reason for Chapter 7 dismissal, especially if the funds are traced back to the debtor’s family and not another steady income source.
Dismissal Of Chapter 7 Bankruptcy By The Court
The court or the US Trustee can also dismiss a Chapter 7 bankruptcy case before a discharge is granted. The most common reasons for this are intentional misconduct and failing to follow the stipulated guidelines of filing for Chapter 7 bankruptcy. Below are more reasons why a court can dismiss your Chapter 7 bankruptcy case.
Bankruptcy Fraud
Debtors are required to be truthful when filling out their bankruptcy forms. They must provide correct and accurate information regarding their income, property, liabilities, and other necessary financial details. Committing bankruptcy fraud amounts to an abuse of the bankruptcy process and can lead to loss of debt discharge rights, fines, and even a jail term. Providing false information on your Chapter 7 bankruptcy papers will result in the dismissal of your case, denial of discharge, and other stern legal actions.
Ineligibility Based on the Means Test
Debtors must pass the Florida Means Test to be eligible for a discharge. Those who don’t qualify for Chapter 7 bankruptcy courtesy of the Means Test but still apply for bankruptcy will have their case dismissed by the court.
Failure to Complete the Required Education Courses
Before filing for Chapter 7 bankruptcy, you must complete a pre-bankruptcy credit counseling course and a debtor education course after filing. Failure to file the certificates of completion in time may lead to the dismissal of your bankruptcy case.
Failure to File Mandatory Forms and Documents
Debtors are required to disclose all their financial information by filing the required bankruptcy forms, including schedules, a bankruptcy petition, and other mandatory forms. Failure to file these documents may have your case dismissed by the court.
After filing a Chapter 7 bankruptcy case, debtors are required to present various accompanying documents to their bankruptcy trustee, including pay stubs, tax returns, and others, to validate the information provided in the bankruptcy papers. Such supporting documents should be submitted to the trustee before the date of the 341 meetings (meeting of creditors), and failure to do so may lead to the dismissal of your Chapter 7 bankruptcy case.
Failure to Attend the Meeting of Creditors
After filing for Chapter 7 bankruptcy, debtors must show up at a compulsory hearing known as the meeting of creditors (341 meetings). In this meeting, a bankruptcy trustee and creditors will ask a debtor some questions about their financial affairs and bankruptcy papers, as well as ask for proof of identification. While creditors hardly show up at this meeting, failure to attend may cause the trustee to request dismissal of your Chapter 7 bankruptcy case.
Failure to Pay Court Filing Fees
Filing for Chapter 7 bankruptcy also requires you to pay court filing fees, but debtors with little to no income may apply for a waiver of the fees. Unless you’re granted a waiver, failure to pay the filing fees will result in the dismissal of your bankruptcy case.
Filing Again After a Case Dismissal
Having your Chapter 7 bankruptcy case dismissed does not mark the end of the road in your quest for financial stability, as you may still file another case shortly after. This is especially true if your case was dismissed without prejudice (dismissal didn’t include any restriction on the time you’ll have to wait before you can file a new bankruptcy case).
Where the court finds a serious reason for the dismissal of your bankruptcy case, such as bankruptcy fraud, then it can be dismissed with prejudice. In that case, you will be barred from filing a new case for a period specified by the court, which could be up to one year. In some cases, debtors could even face a permanent injunction that prevents them from ever filing another Chapter 7 bankruptcy case.