Always consult your bankruptcy attorney before voluntarily dismissing a Chapter 13 bankruptcy. Before filing for Chapter 13 bankruptcy, individuals must complete a credit counseling course to understand their financial situation and explore alternatives. If you can’t afford the repayment plan Rule 109(g)(2) restricts your refiling in hopes of a second chance. If you refile a bankruptcy, you have specific time restrictions you need to know about. Problems can continue to happen to good people after they file Chapter 13 to attempt to keep their homes. Perhaps you filed a Chapter 13 in good faith, hoping to make the plan payments. However, you fell behind again due to disability, divorce, death in the family, or other problems.
Bankruptcy courts handle dismissals and play a crucial role in overseeing bankruptcy filings. They can dismiss cases for various reasons, and understanding the problems of dismissal for debtors is important. It means you may or may not be able to keep your home.
Understanding Bankruptcy Dismissal
What is a Bankruptcy Dismissal?
A bankruptcy dismissal is a court order that cancels a bankruptcy case. When the bankruptcy court dismisses a bankruptcy case, it means the bankruptcy filing and the protection of the automatic stay is no longer in effect.
This can happen voluntarily, at the debtor’s request, or involuntarily, by the court’s order. A voluntary dismissal might occur if the debtor believes they need to refile the case or that they can resolve their financial issues without the court’s help. An involuntary dismissal most often results from the failure to make timely payments or comply with court requirements like turning over a tax refund in bankruptcy cases. A bankruptcy plan may require too much money making the plan unaffordable. Paying a small conversion fee may allow you to convert and file as a Chapter 7. A case dismissed for non payment does not mean the bankruptcy case dismissal was intentional or for bad faith. Amending with a new petition or filing a new case may be able to pay debt enough money to cure a default and provide that fresh start.
A bankruptcy discharge means you have properly completed your bankruptcy and obtained the permanent court order protecting you. A dismissal means you lost this protection. A bankruptcy discharge eliminates the debtor’s obligation to pay certain debts, typically after completing a Chapter 13 repayment plan.
This discharge provides a fresh financial start. On the other hand, a dismissal means the bankruptcy court has canceled the bankruptcy filing, and the debtor is no longer protected by the automatic stay. This leaves the debtor exposed to lawsuits, garnishments, liens, repossessions, seizures, and foreclosures.
Consequences of a Bankruptcy Dismissal in Bankruptcy Court
If the bankruptcy court dismisses your case, the consequences can be immediate and severe. But you can often refile once. Often you cannot refile a second or third time You can even be banned from repeated filings. Chapter 13 bankruptcy has a 60-70% success rates.
The automatic stay, which temporarily halts creditors’ collection activities, will be lifted by a dismissal. This means creditors can resume debt collection lawsuits, wage garnishments, and foreclosure proceedings. Additionally, you may lose the opportunity to discharge certain debts. Any penalties and interest that were paused during the bankruptcy process will be added to the debt and will have to be paid in a subsequent bankruptcy. It’s essential to avoid the penalties of a bankruptcy dismissal.
Reasons for Dismissal
Why the Bankruptcy Court Might Dismiss Your Bankruptcy Case for Nonpayment in Chapter 13
The bankruptcy court may dismiss your Chapter 13 case for several reasons, with nonpayment of Chapter 13 plan payments being a primary cause. If you fail to make the required payments to the bankruptcy trustee or do not adhere to the repayment plan, the court may decide to dismiss your case.
Other common reasons include failing to file necessary documents, not paying the court filing fee, or missing court hearings. To avoid dismissal, you must stay in close communication with your bankruptcy trustee and attorney, especially if you’re experiencing financial difficulties. We can provide guidance and help you go through the bankruptcy process and successfully complete your case.
Voluntarily Dismissing a Chapter 13 109(g)(2) in Bankruptcy Court and Refiling
If you fall behind in paying the mortgage after filing chapter 13, the lender will file a motion to terminate the stay. If they are successful and go back to foreclosing, there may be no reason to stay in a Chapter 13 bankruptcy. In those circumstances the Chapter 13 bankruptcy is no longer going to stop the foreclosure.
If you have to dismiss the case you may be required to wait 180 days before you refile. If you need to dismiss the Chapter 13 case and refile waiting too long to have the case dismissed will give the creditor time to foreclose. However, the problem is that you are only allowed one or two bites at the apple to fix your defaulted mortgage.
Can I Refile Chapter 13 After Dismissal? 109(g)(2) refiling once
Chapter 13 Bankruptcy relief provides a method for debtors to reorganize finances under court supervision. You get the protections of the automatic stay, from creditors during the plan which may be 36 or 60 months. Before refiling for Chapter 13 bankruptcy, individuals must complete a credit counseling course to understand their financial situation and explore alternatives.
Understanding the process of dismissing and refiling a Chapter 13 case is important because you can refile once or twice during six months to a year. But you can’t file a third time and get the protections of an automatic stay.
If you dismiss a Chapter 13 case and file a second petition, you normally must wait over six months before you refile the second case. Even then you have to show why you should be given a second chance to extend the stay beyond 30 days. Refile a second time within a year and you don’t get any stay. If the court dismisses the Chapter 13 bankruptcy and repayment plan often there is no penalty. if you refile immediately in the name of a non filing spouse bankruptcy dismissals rarely prevent the spouse from getting a stay. But bankruptcy judges will eventually deny automatic stay protection when there is a pattern where you re file repeatedly after a case was dismissed.
During that time if you don’t or can’t delay the foreclosure, the house will be sold. Sometimes you can refile, and the bank doesn’t object. But you are taking a big risk that the second case will be dismissed.
Can I Refile Chapter 13 After Dismissal? 109(g)(2) Refiling a twice a year after a motion for relief of automatic stay.
Most mortgage companies want the mortgage payments paid on time. They don’t want to foreclose the home. However if you are constantly delinquent and refile repeatedly they are better off foreclosing. You might file a bankruptcy in your name and then file in the wife’s name as a strategy to avoid this. Then you never or rarely refile within 180 days or a year.
A few lenders and many servicers do not operate on the goal of making the payments on time. If you don’t make the payments on time they charge additional fees. Especially servicers operate on these fees and they milk accounts for all the money they can get in late fees, penalties and interest. For some they make more money on forced placed insurance and escrow fees than they make from the loan. They want to foreclose.
Many lenders will not object if you file a second case after a motion for relief from stay. Some servicers and attorneys, however, will object so they can increase their attorney fees in the case and servicing fees. While this may increase the loss to the taxpayer or lender, it increases their profits.
If they object, the court may be required to dismiss the case. In some districts, you may get away with a second filing. It becomes like sneaking through the bear cave to get a second case confirmed. To understand your options and avoid pitfalls, it is advisable to consult your bankruptcy lawyer never assume you will get this right.
Take a second bite of the apple and the mortgage bites back.
Congress enacted section 109(g)(2) to stop the abuse of repeated Chapter 13 bankruptcy filings. If you lose a motion for relief from stay and then attempt to refile you have given the bank 180 days in state court to finish a foreclosure. Section 109(g)(2) provides that an individual may not be a debtor: “if the debtor requested and obtained a voluntary dismissal of a previous bankruptcy case at any time in the preceding 180 days.”
If the court dismissed your case under section 109(g)(2), it can have significant consequences. The loss of creditor protection means creditors can resume collection efforts, and you may face challenges in refiling or considering other bankruptcy types. Seeking legal assistance is crucial to navigate these consequences and explore your options.
The purpose of the statute was to prevent abuse. However, to not allow a second bankruptcy becomes absurd under some circumstances. For instance, debtors don’t plan heart attacks with the intent of not paying their mortgage. The purpose of the rule was to stop the abuse of repeat filings. In some cases, enforcing the 109(g) rule harms the creditor, the debtor, taxpayers, and local homeowners. The courts have taken three different positions on 109(g).
The three 109g tests to voluntarily dismissing a Chapter 13 109(g)(2) repayment plan and refiling.
Some judges believe bankruptcy law requires the court to mandatorily dismiss any Chapter 13 filed within 180 days after voluntarily dismissing a prior Chapter 13. These courts look at it as an eligibility requirement In re Andersson, 209 B.R. at 78. Dismiss your own case and you are ineligible to file bankruptcy.
Others look to see if there is a causal connection. For instance, was there an event or cause which damaged the debtor and caused the failure of the Chapter 13 plan? If there is some involuntary reason or cause completely unrelated to the motion for relief from stay, the court can choose to allow the second case. In re Duncan, 182 B.R. 156, 159 (Bankr. W.D. Va. 1995). In our district it is also necessary to file tax returns annually and submit a budget with the returns to the Chapter 13 trustee to comply with bankruptcy requirements for plans which pay less than 100% and avoid dismissal.
Other courts use common sense and a discretionary approach. In re Hutchins 303 B.R. 503, 505 (Bankr. N.D. Ala. 2003). The circuits are not uniform, and you may find different judges in the same district using different approaches. Even the same judge might not be consistent. The debtor can file a second case, and often, it is approved anyway. But the debtor is taking a risk. If you’re having problems, see us for real answers. You can also see this article on Can I Refile Chapter 13 After Dismissal? 109(g)(2).
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