What Happens if Chapter 13 Bankruptcy is Denied?

Key Takeaways

• Judges deny 97% of Chapter 13 bankruptcy cases filed without legal representation.
• A judge will dismiss the case when you fail to follow all the rules, provide information, make payments, or submit filings by the deadlines.
• When a judge denies your petition, you lose the protections of the bankruptcy court.
• In many cases, you can achieve debt relief through alternative programs without bankruptcy.

Personal bankruptcy includes Chapter 7 and Chapter 13. Filing Chapter 7 could allow you to eliminate debt without repaying creditors. However, you could lose assets, and you may not qualify if you earn above the median income in your state based on your household size. Chapter 13 is the only bankruptcy available when either of these issues arises.

In Chapter 13, you establish a 3- or 5-year repayment plan a judge must approve. Then you repay creditors based on the plan. At the end of the payment period, a judge reviews the case before discharging the remaining balances on qualified debt.

The challenge is that a judge could dismiss your case anywhere along the way.

Top Reasons Judges Dismiss Chapter 13 Cases

There are many reasons a judge might dismiss a bankruptcy petition. The bankruptcy law is exact, and any misstep can result in a case dismissal. Below are the most common reasons:

• Failing to pay the court fees
• Not preparing for and attending the mandatory meeting of creditors
• Not filing all required bankruptcy forms by the established deadlines
• Not making payments according to the plan
• Not providing the required documentation to the trustee by the deadlines given
• Not proposing a Chapter 13 payment plan that complies with bankruptcy law
• Failing to file annual tax returns
• Failing to submit a copy of tax returns to the trustee annually

In nearly all cases, judges dismiss Chapter 13 bankruptcy petitions because you fail to do something the court requires by the given deadline.

What Happens When a Judges Dismisses a Chapter 13 Petition?

When a judge dismisses your case, you immediately lose the protections of the bankruptcy court. The most widely used protection is the automatic stay that prevents creditors from pursuing collections, filing legal action against you, or enforcing an existing judgment.

Without the automatic stay in place, debt collectors will restart collection efforts. Companies can sue to recover missed payments. And any existing judgments can resume enforcement through garnished wages, account levies, or property liens to collect on past due accounts.

Refiling for Bankruptcy

In some cases, you can immediately refile Chapter 13 to reinstate the automatic stay, provided you can correct the mistakes that resulted in the dismissal. Other times you must complete a waiting period before you can refile. The reason for the dismissal determines whether you can immediately refile.

Other Debt Relief Alternatives

The Chapter 13 bankruptcy is complex, and 97% of people who file without an attorney have their case dismissed without receiving the debt relief sought.

If you currently struggle to pay bills and are considering Chapter 13 or have had your Chapter 13 case dismissed, you may benefit from a debt relief program outside of bankruptcy.

Debt negotiation can reduce the amount owed, allowing you to pay creditors less than the total balance without court oversight. You have more control over your debt relief journey and the amount paid toward debt elimination each month. Negotiating with creditors allows you to expedite payoffs in a way Chapter 13 does not permit. Contact us today to learn more about alternative debt relief programs.

FAQ

• Can a judge deny my Chapter 13 petition?

  A judge can dismiss your case if you do not follow the bankruptcy rules precisely. Missing a deadline, a payment, or failing to submit required documents can lead to a dismissal.

• Why would a judge dismiss a Chapter 13 bankruptcy petition?

  There are many reasons a judge could dismiss a Chapter 13 bankruptcy case. All the reasons have to do with failing to do something the bankruptcy court requires by the established deadline. For example, a judge can deny your case for a seemingly simple mistake such as failing to file annual tax returnsor missing a plan payment.

• What happens if my bankruptcy repayment plan is not approved?

  If your repayment plan does not abide by the bankruptcy court rules, the trustee will object. The trustee has a legal responsibility to get the maximum amount to repay creditors, and an approved plan reflects that goal. If the trustee rejects the plan, you have an opportunity to fix mistakes, file an amended plan, or resolve the objection by providing additional information to the trustee. If you cannot get the plan approved, a judge will dismiss the case.

• Can I refile if the judge dismissed my bankruptcy petition?

  You can generally refile Chapter 13 after a two-year waiting period. However, there are some cases when you can immediately refile after a case dismissal.