Chapter 13 bankruptcy is a powerful tool that can help families and individuals throughout the State of Maryland get their debt under control. Chapter 13 can…
- Stop a foreclosure and allow you to pay back the arrears that you owe
- Restructure secured loans such as car loans, home equity lines of credit, and other liens on real property
- Be used to pay pennies on the dollar for certain kinds of debt
- Allow you to catch up on missed payments such as mortgage arrears, car arrears, and tax debt, and pay down some of their obligations
- And much more!
A Chapter 13 payment plan lasts between three to five years. However, a lot can happen during that time that could affect your ability to make regularly scheduled payments. If this happens and you are no longer able to make your Chapter 13 monthly payments, the bankruptcy trustee can ask the court to dismiss the case, or a creditor can request relief from the automatic stay and continue collection efforts – Chapter 13 Involuntary Dismissal.
What Can I Do If Chapter 13 Involuntary Dismissal Happens?
When facing Chapter 13 involuntary dismissal, all is not lost. We will discuss several of your options below.
Oppose the Dismissal
If the involuntary dismissal is the result of a trustee’s motion to dismiss, you will have a chance to review and oppose it and you will usually have 21 days in which to respond. This may be your best course of action if your missed payments were the result of a temporary setback, such as a loss of income due to illness or injury, or a simple misunderstanding. You will be required to prove to the court that the trustee is wrong about your nonpayment (for example, you made the payment, but the check got lost in the mail), or show that the nonpayment was out of your control, but something you can correct to resume regularly scheduled payments.
If you can adequately prove that your setback is temporary or a simple misunderstanding and that you will be able to get back on track, the court or trustee will, in most cases, work with you and allow you time to catch up on your missed payments. Alternatively, you can try to renegotiate your Chapter 13 payment plan or request a hardship discharge.
- Following a motion to modify the plan, the court and Chapter 13 trustee will typically request proof of your new circumstances and, if satisfied, they can order a new plan payment for the duration of the case.
- You may be able to request a hardship discharge to release debts early if you meet the following conditions. 1) Circumstances beyond your control, for which you should not be held accountable, have affected your ability to make payments. 2) Unsecured creditors have received adequate payment at least equal to what they would have received in a Chapter 7 bankruptcy. 3) Modification of your Chapter 13 payment plan is not practical.
Appeal the Dismissal
When faced with a Chapter 13 involuntary dismissal, if your case is dismissed, you have the option to file a notice of appeal within 14 days of your case being dismissed. You will also need to file a legal brief with the court explaining your circumstances and why you believe the court should grant the appeal. Then you will be required to appear at a hearing to present oral arguments and either 1) prove that the court made a mistake or 2) present a very compelling reason why the dismissal should be overturned.
This process can be extremely complex.
Refile for Chapter 13 Bankruptcy
If your bankruptcy is involuntarily dismissed without prejudice, you can refile for Chapter 13 bankruptcy immediately and fix the problems that arose in the first case However, there may be some additional limitations.
- If you refile within a year of Chapter 13 involuntary dismissal, the automatic stay only lasts for 30 days. You can petition the court to extend the stay.
- If you refile and have had two or more cases dismissed within a year, the automatic stay does not take effect at all. You can petition the court to impose the automatic stay.
- You will also have to re-do the credit counseling course, and that involves fees.
If your bankruptcy is dismissed with prejudice, meaning it was dismissed because of a willful failure to abide by court orders or because of a failure to appear before the court at required hearings, you will not be able to refile for 180 days.
File for Chapter 7 Bankruptcy Instead
If your Chapter 13 case has been dismissed, you may be eligible to file for Chapter 7 bankruptcy instead as long as you’re under the income limits for the Chapter 7 Means Test. However, before doing so, it is important to understand the impact that a Chapter 7 bankruptcy may have on your assets. For example, if you own real property or a vehicle that has equity, the Chapter 7 trustee may wish to sell those and distribute the proceeds to creditors. However, this is not always the case, as many times property either has no value to the Bankruptcy Estate, or the property can be exempted.
Questions About Chapter 13 Involuntary Dismissal?
Steiner Law Group is a boutique law firm that assists Maryland citizens with bankruptcy and financial restructuring services. We have helped hundreds of individuals, families and businesses discharge millions in debt.
If you have questions about Chapter 13 involuntary dismissal and bankruptcy, please schedule a risk free consultation or contact Steiner Law Group, LLC a Baltimore, Maryland law firm at (410) 670-7060 to learn more about bankruptcy options.