Bankruptcy Rule 109 (g) Can I Refile if my Chapter 13 is Dismissed?
Keeping up on your Chapter 13 payment isn’t always easy, but it’s necessary. If you become late on payments to a secured creditor, he will file a motion for relief from stay to foreclose or repossess property. Unless you refile or obtain a probationary order you will lose the property because the secured creditor will foreclose in state court or repossess the auto. When he obtains relief from stay he won’t be restricted by the automatic stay and bankruptcy court.
You can dismiss your case and file a second case to save the home or car but Rule 109 (g)(2) prevents some debtors from repeatedly filing in bad faith. You’ll need to refile a Chapter 13 but if you dismiss your case you are often prevented from refiling. That is why we often file such cases in the name of just one spouse. They we have someone else to take over if she has to.
Filing a second case drags him back into Bankruptcy Court where he can be controlled but this sword has two edges. You have to obey the rules just as he does. In bankruptcy court making payments on time means almost everything. These payments start the month you file.
When does bad faith and rule 109 (g) (2) apply in Chapter 13 bankruptcy?
The bankruptcy courts are federal courts with federal judges who will not have their time wasted. Courts follow either a Mandatory approach or a Discretionary approach to the 109 (g) (2) rule. Rule 109(g)(2)only kicks in if the case is dismissed by the debtor after a creditor files the motion for relief from the automatic stay. If the Trustee dismisses the case for non-payment or for not providing documents or showing up for a hearing you can probably refile.
However, if the Debtor is repeatedly filing you will still probably be barred from re-filing. Filing always requires good faith. Courts require proof a new bankruptcy case is sincere and not motivated by unethical intentions such as just delaying foreclosure without any intent to pay in good faith. If you refile your Chapter 13 case, expect to encounter the following problems:
- new legal fees and costs
Motions for Relief from Stay - shortened or less effective automatic stay protection. The stay may be for only 30 days and you will need to file a motion to extend that stay or there may be no stay to prevent creditors from foreclosing.
- increased scrutiny by the court and trustee making it difficult to prove you can maintain and successfully complete a plan, and
- credit rating impact.
If the Court has already closed your Chapter 13 case and your financial situation has changed, you might want to consider whether Chapter 7 bankruptcy would help. Filing a Chapter 7 before filing a Chapter 13 almost always lowers the amount that has to be repaid in a Chapter 13 bankruptcy and it will take 4-5 months. During that time the 180 days you need to wait runs.
Losing Automatic Stay Protection in Chapter 13 Bankruptcy
Bankruptcy courts frown on serial bankruptcy filings because of the potential to abuse the automatic stay—the order that stops most creditor collection actions. If you file a new case within one year of the previous case’s dismissal, the automatic stay will last only 30 days unless you successfully motion the court to extend the automatic stay.
Because the motion to extend could fail, consider another approach—proposing a well-thought-out repayment plan that’s unlikely to draw an objection from the Trustee or Creditors. Once the court confirms the plan, the plan itself will bind both you and your creditors to its terms, preventing them from taking action against you as long as you remain in compliance. Creditors generally don’t want the home or car. They want the payments on time.
What if a 13 is dismissed for not paying the plan payments?
If you don’t pay Chapter 13 trustee plan payments or follow court rules, the trustee will file a motion asking the bankruptcy court to “dismiss” or close your case. At the dismissal hearing, you’ll have an opportunity to ask the judge for time to catch up, and if the judge agrees, your case will remain open. If the court grants the trustee’s dismissal request, your Chapter 13 case will come to an end but normally there is no waiting period to refile a new case and no penalty or limit for the stay.
Why the Court Might Dismiss Your Case for Nonpayment in Chapter 13
You’re expected to pay your Chapter 13 payment promptly each month. If you don’t pay on time, creditor interest and fees can build, and when they go unpaid, the Chapter 13 trustee won’t have enough money to pay the amounts owed under the plan. Repeated nonpayment can be seen as bad faith, leading to increased court scrutiny and challenges in obtaining protections from creditors.
Usually, the Chapter 13 trustee will work with you if you have an unexpected expense or problem. But you must inform the trustee immediately and follow the trustee’s payment instructions to get your plan back on track. The congressional intent behind section 109(g)(2) is to prevent abusive repetitive filings by debtors gaining an unfair advantage by dismissing cases to evade court-ordered relief from stay.
Consequences of Dismissal and Refiling Restrictions
When a bankruptcy case is dismissed, it has significant consequences for a debtor. If the court rules that the case is dismissed with prejudice, the debtor may be barred from refiling for a certain period or prohibited from filing bankruptcy on the debts that existed at the time of the initial filing. On the other hand, if the case is dismissed without prejudice, the debtor may be able to immediately refile.
Timing the Chapter 13 bankruptcy case dismissed
In Chapter 7 bankruptcy, if the debtor receives a discharge, they must wait at least eight years before filing Chapter 7 again. If you get a Chapter 13 discharge, the debtor must wait at least two years before filing Chapter 13 again and getting a discharge. You can always file a Chapter 13 but you may not need a discharge if you only need to catch up a car loan or home mortgage.
You have problems when the debtor requests that the case be dismissed. If the case was dismissed and refiled on other grounds by other parties the assets of the debtor will have an automatic stay provided to protect the debtor and his property.
Was the last case dismissed because the debtor was unable or failed to respond
Refiling restrictions vary depending on the specific circumstances of the case. It is important to plan for and avoid the consequences of dismissal and refiling. If you have a choice of not making mortgage payments or plan payments miss the plan payment. Bad things can happen to good people. Make sure the prior case has no causal connection that shows the new case pending will suffer the same problems.
109 (g) (2) only applies if the debtor requests dismissal. But you can also destroy your ability to refile if the court finds you filed in bad faith. Bad faith restrictions will apply whether or not your case is voluntarily dismissed. This can the Debtor in a prior case
- under-reported income
- failed to disclose assets
- has repeated filed or
- several other factors such as repeat filing.
What to Expect After the Bankruptcy Court Dismisses Your Chapter 13 Case
Your primary concern should be your creditors. You are being thrown back to the wolves. They’ll be able to start collecting from you once the bankruptcy court dismisses your case, especially if it was a voluntary dismissal, and you lose creditor protection because your Chapter 13 plan and the automatic stay are no longer in place.
You might, or might not owe as much as you did before filing Chapter 13. You’ll get credit for all of your Chapter 13 payments. However, any interest that was stayed during bankruptcy will be added to what you owe. So balances on credit cards, medical bills, personal loans, and other unsecured debt could be higher than before you filed if the court dismissed your case before the plan could discharge your debts.
Also, prepare yourself to handle unresolved mortgage, car loan, and judgment lien problems. Your creditors can resume wage garnishments, foreclosures, and repossessions if your Chapter 13 plan didn’t bring the balances current (and there’s a good chance it didn’t). You’ll have to start all over again with a new Chapter 13 bankruptcy case because you can reopen a dismissed case or you can object to a dismissal. But you can’t refile the old case.
Preparing the New Chapter 13 Bankruptcy Case
Plan to pay a bankruptcy attorney to prepare a new petition, schedule, and plan based on your current situation. You’ll pay a new filing fee and take another credit counseling course if it’s been more than 180 days since you completed the first course. Not making payments is costly or worse will cost you a home or car.
Depending on the reason for the dismissal, you might want to retain new counsel. Some bankruptcy lawyers steer clear of clients who struggle with problem Chapter 13 clients. Expect problems keeping your old attorney or getting a new one. It generally was not your old attorney’s fault that you did not make the payments on time. The prior attorney didn’t get paid so why would a quality attorney want your case unless it is guaranteed you will pay this on time?
Use an experienced lawyer
If you are considering filing for bankruptcy or have had a bankruptcy case dismissed, it is crucial to seek professional guidance from an experienced bankruptcy attorney. Every mistake increases the chance you will lose your home because you didn’t comply with the order of confirmation. Most debtors do not even read the order of confirmation that lists what you are required to do. If you obtain confirmation it protects you and the creditor. If you want to be successful and discharge debt you have to obey this order. Your petition and the plan proposes how to pay debt but it will also prevent debtors from abusing the bankruptcy system.
Filing bankruptcy is more like dancing the tango than ordering a pizza. Dancing requires that you do your work together. Ordering a pizza is all the store’s fault if the pizza isn’t hot, tastes right, or arrives on time. A quality Chapter 13 bankruptcy is successful in getting the discharge and will protect assets. The bankruptcy plan and peitition will pass review by a trustee or judge. A properly prepared petition will allow completing the case.
But a Chapter 13 bankruptcy case was dismissed most often because the Debtor couldn’t make the payments or wouldn’t make the payments. The mistakes an attorney makes in preparing the petition or plan are primarily made before the case is confirmed. The case was dismissed because the plan payments were not made or in our Western district often because the Debtor failed to file the annual budget or turn over the tax refund.
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