Following dismissal, Chapter 13 cases can be revived
People who file a Chapter 13 case must be prepared to spend several years under a bankruptcy trustee's scrutiny, and living with limited finances as they pay creditors through a court-ordered repayment plan.
While filers may keep their property under Chapter 13, they may not be prepared for living within the significantly limited means that their approved plan requires. That factor is one of the reasons why filers may miss monthly creditor payments, which can lead the U.S. Bankruptcy Court to dismiss the case.
However, re-filing a Chapter 13 action is possible within certain conditions when a dismissal occurs.
Missing creditor payments, not paying court fees, falling behind in child support or alimony payments - which cannot be discharged in bankruptcy - or failing to provide the court with required documents are all reasons why a judge may dismiss a Chapter 13 action. Those are cases dismissed "without prejudice," thereby allowing the debtor to re-file at a later time.
When a case is ended "with prejudice," the court has found that debtors willfully broke bankruptcy rules or committed fraud. As a result, they are prohibited from re-filing for six months following the dismissal, according to United States Courts. The six-month waiting period also applies when people voluntarily ask that their cases be dismissed.
One of the most common reasons why people fail to make payments in their Chapter 13 cases is a loss of employment. If that occurs, particularly before the creditor payment plan is approved by the court, they may be able to obtain a hardship discharge before a dismissal takes place.
There is also the possibility of reinstating a bankruptcy case as long as it is done within 10 days after being dismissed. If approved, a reinstatement allows debtors to continue their case. Re-filing a new case requires that all new documents be filed with the court.
When people re-file within 12 months of the original action, they have the protection of an automatic stay for only 30 days. They must file a motion to extend their stay, which halts creditor collection efforts and lawsuits, to keep it in effect.
Finally, a judge may agree to convert a case to Chapter 7 immediately after a dismissal. If debtors decide to pursue this liquidation option, they must wait six months following the Chapter 13 dismissal.
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