What Does Trustee’s Motion to Dismiss Mean?
If you are in a Chapter 13 bankruptcy and unable to keep up with your payments, the Trustee or one of your creditors may make a motion to dismiss Chapter 13. You must take quick action to fix the situation if this happens.
Depending on where you live, a written response to the motion may be necessary. Otherwise, they will grant it without a hearing. If a response to the motion is necessary, make sure you or your attorney file one promptly. You will have a chance to review and oppose the motion to dismiss Chapter 13. Take note, that if you do not oppose the trustee’s motion, the court will dismiss your bankruptcy without discharging your debts. However, you can oppose the trustee’s motion if your difficulties were temporary and you want to continue your bankruptcy. You’ll need to show the court you can afford your plan payments if you choose to oppose the trustee’s motion to dismiss Chapter 13. Also required is an explanation of why the court should not dismiss your case.
Generally, the court or trustee will work with you and allow you time to catch up on your payments if they deem your reason for falling behind as valid. However, if the court believes you can’t afford to continue making payments on your Chapter 13 plan, they will dismiss your bankruptcy.
Our experienced Kentucky bankruptcy attorneys at O’Bryan Law Offices are here to help our clients get a fresh start financially. In this post, we’ll discuss Chapter 13 dismissals further.
What Can You Do If You Can’t Afford Your Chapter 13 Plan Payments?
It is often possible to save a Chapter 13 plan that falls into arrears. Making additional payments or a lump sum payment from future income, such as a tax refund, are possible fixes. An agreement for a “Strict Compliance Order,” which allows the plan to continue as long as all future payments are on time, is another option.
However, if you cannot afford to make your monthly payments, you may be able to modify your plan to reduce your obligations, request a hardship discharge, or convert your Chapter 13 bankruptcy to a Chapter 7. Sometimes, converting to a Chapter 7 is less costly than having the case dismissed and then filing a new Chapter 7 case.
Let your attorney know if you can’t afford your Chapter 13 payment due to a change in your circumstances. Changing your repayment plan to a lower monthly payment may be a possibility. You’ll have to prove the change in circumstances by filing paperwork and providing documentation. A modification won’t be an option if you can’t make minimum mandatory payments due to a drop in income. Remember that plan rules require payment in full for many bills, such as your mortgage payment, some taxes, and support arrearages.
Asking for a Hardship Discharge
Asking the court for an early hardship discharge is another possibility. It depends on how long you have had your case and if you meet certain criteria. These criteria include the inability to feasibly modify your plan, unable to pay due to circumstances out of your control, or you have paid your unsecured creditors (creditors other than those holding your car or house note) the amount they would have received in a Chapter 7 case. Your attorney must file a motion asking for the hardship discharge and provide proof of the hardship. Take note, hardship discharges are unusual, but a possibility in specific situations.
You can also convert your case to a Chapter 7 bankruptcy if you can’t afford to make your plan payments. You’ll have to pass the means test and show your income is low enough to qualify. Converting to a Chapter 7 bankruptcy can be risky because your non-exempt assets (property that can’t be protected with a bankruptcy exemption) could be lost to the Chapter 7 trustee assigned to your case. Talk to your lenders if you are behind on a mortgage or car payment. You’ll need to make arrangements with them to keep those assets and avoid a foreclosure or repossession.
Common Reasons for Dismissed Chapter 13 Cases
Bankruptcy courts may dismiss a Chapter 13 case for several common reasons, including:
- Not paying the Chapter 13 payments
- Not meeting certain deadlines
- Failing to propose a Chapter 13 plan compliant with bankruptcy law
- Failing to submit required documentation to the Chapter 13 trustee
- Not filing tax returns each year and submitting a copy to the trustee
What Happens if Your Chapter 13 Gets Dismissed?
The court chooses whether to dismiss your Chapter 13 bankruptcy with or without prejudice. Most cases dismiss without prejudice. This means you can immediately file for bankruptcy again and begin the Chapter 13 process again. You may also file a Chapter 7 if you qualify.
However, if you abused the bankruptcy process or acted in bad faith, the court may dismiss your case with prejudice. That means you won’t be able to file again until the period detailed in the dismissal order passes or discharge the debts included in your original filing. It’s as if you never filed bankruptcy if this happens. You lose your automatic stay protection – that’s the order that kept your creditors from trying to collect money from you while you were in your bankruptcy case. Wage garnishment, attaching bank accounts (the funds in your bank account can be used to pay your debt), and property liens are possibilities, as well as collection letters, debt collection lawsuits, repossessions, and foreclosures. The only way to prevent this is to pay the debt or re-file a new bankruptcy case.
How Long Does it Take for a Chapter 13 to be Dismissed?
The length of time it takes for a dismissal of a Chapter 13 bankruptcy case varies depending on the specifics of the case. To receive a better estimate on how long it may take for the dismissal of your case, speak with one of our Kentucky bankruptcy attorneys today.
Can I Refile a Chapter 13 After a Dismissed Chapter 13 Case?
You can re-file your case immediately if your bankruptcy dismisses without prejudice, but it also depends on the reason for your Chapter 13 case dismissal. If you’ve had more than one bankruptcy case in a short amount of time, the bankruptcy court could keep you from filing another Chapter 13 case for a specific period of time. Moreover, they may limit your automatic stay as well.
Converting to a Chapter 7 Case to Avoid a Dismissed Chapter 13 Case
Your situation will determine whether conversion is an option. Most bankruptcy courts allow you to file a “notice” and pay a small conversion fee. For example, if you lose your job and cannot stay in your Chapter 13 payment plan, you may qualify for Chapter 7.
However, make sure you won’t have any issues converting a case. If you’re behind on mortgage payments or own property with non-exempt equity, you could lose your property in a Chapter 7 case.
Filing a Chapter 7 Case After a Dismissed Chapter 13 Case
If your Chapter 13 case dismisses, it’s possible to re-file under Chapter 7 if you’re below the income limits. In this case, you’ll want to make sure all your property remains protected by available bankruptcy exemptions, as this isn’t an issue encountered in Chapter 13 cases. You may be able to file for Chapter 7 without an attorney because you won’t need to file a Chapter 13 repayment plan. If you file on your own, make sure the automatic stay will go into and stay in effect. You also want to make sure you’re not prevented from filing another bankruptcy case due to the reason behind your Chapter 13 case dismissal.
Call O’Bryan Law Offices Today
At O’Bryan Law Offices, we pride ourselves on helping those in need get out of financial binds. Even if you plan out your every financial move ahead of time, unexpected hardships are sometimes unavoidable. If you need help getting back on your feet after hard times, bankruptcy might be the perfect solution. For more information on how we can help you or learn more about a motion to dismiss Chapter 13, please call our offices at 502-400-4020 today, or fill out our online intake form.