Chapter 13 debtors can take steps to prevent dismissal of their case
A Chapter 13 bankruptcy, in which an individual must agree to pay creditors over several years, is more complicated than a Chapter 7 case, the most common form of personal bankruptcy.
As a result, there are parts of the process that are similar, but more steps have to be taken in a Chapter 13 action. For instance, a Chapter 13 bankruptcy requires debtors to file a comprehensive list of creditors, assets, liabilities and current income and expenses, as in a Chapter 7 case.
However, they must also provide the court with a calculation of the value of their property to determine what is exempt from their repayment plan. To avoid dismissal, debtors must take a pre-filing credit counseling course within six months before filing bankruptcy through a designated credit counseling agency. A post-filing financial management course must also be completed within 45 days after the debtor attends the 341 meeting before a bankruptcy trustee.
In addition to a 341 meeting, in which creditors have a right to challenge the debtor's claim for court protection, those filing bankruptcy under Chapter 13 must attend a confirmation hearing in which their repayment plan is presented to the U.S. Bankruptcy Court. If the trustee overseeing the case objects to confirmation, debtors must make sure all points related to the objection are addressed to avoid dismissal of their case.
It's also the responsibility of a Chapter 13 debtor to begin making payments immediately after filing the repayment plan with the court. In this type of bankruptcy, often referred to as the "wage earners" bankruptcy, debtors may make their payments through an income deduction by their employers. Since this sometimes takes several weeks to go into effect, debtors are responsible for making those payments directly to the court trustee.
Missing payments can be grounds for dismissal.
If debtors' circumstances change significantly - such as the loss of a job or unexpected family expenses - these changes must be communicated right away to the court, either through the bankruptcy attorney or by debtors who are representing themselves. The court should know of any factor that prevents debtors from making monthly payments, which may be suspended temporarily. In some cases, the plan can be modified to meet new circumstances.
Debtors have the right to ask the court to voluntarily dismiss their case if their financial situation improves. However, when an involuntary dismissal is issued by the court, CreditInfoCenter.com recommends that debtors move quickly to have their case reconsidered and submit any additional data that may help reinstate it.
Sometimes, a dismissal occurs because of an oversight by the parties involved and is considered an administrative mistake. Such dismissals are easier to overturn than those involving a challenge by a creditor, the website states. In these more difficult cases, debtors may have to submit new evidence that contests a creditor's claim. Even when the bankruptcy court finds in favor of a creditor, debtors have the right to appeal the decision.
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