At the conclusion of your bankruptcy case, you typically will receive a bankruptcy discharge. A bankruptcy discharge means that all of the eligible debts that are included in your bankruptcy case are erased, and your creditors cannot pursue collection action against you to enforce the debts. During the bankruptcy case, you can ask the court to dismiss your case, or the court may dismiss your case on its own, and you will not receive a bankruptcy discharge. However, you can ask the bankruptcy court to reinstate your bankruptcy if it is dismissed by the court.
Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 bankruptcy are the two most common types of bankruptcy filed by individuals. In a Chapter 7 bankruptcy, the bankruptcy trustee may sell your non-exempt assets to raise money to repay your creditors. In contrast, filing for Chapter 13 bankruptcy allows you to create a repayment plan that takes three to five years to complete. During the plan, you will pay repay all, or a portion of, your debt by making monthly payments toward the plan to your Chapter 13 bankruptcy trustee.
In Chapter 13 bankruptcy, you keep your property while you complete the plan. A Chapter 7 bankruptcy case is usually completed in three to four months, while your Chapter 13 bankruptcy case will not be completed until the end of your repayment plan. Both types of bankruptcy provide a discharge if you do everything you're supposed to do. However, if you fail to do certain things, your case could get dismissed without a discharge.
Read More: How to Cancel a Chapter 13 Bankruptcy
Reasons for Dismissal
There are a variety of reasons why your bankruptcy petition may be dismissed involuntarily by the court, the most common being failure to fulfill one of the requirements of filing or of obtaining a discharge. For example, if you do not attend credit counseling before filing for bankruptcy or if you do not submit a tax return to your bankruptcy trustee, the court may dismiss your case. Individual bankruptcy debtors must also take a second financial management course after their case is filed before they can obtain a discharge; if the certificate is not filed in time, the court will dismiss the case.
In a Chapter 13 bankruptcy, your case may be dismissed if you do not make payments toward your plan each month on time and in full, or if the plan you propose is not feasible.
In any Chapter, your case might be dismissed if it was filed in bad faith or if you are found to have committed fraud. However, these instances are rare.
Motion to Reinstate Bankruptcy
If your dismissal was due to an error that you can correct, you can reopen the case and ask to reinstate the bankruptcy so you can fix the problem. The bankruptcy court has the discretion to reinstate your bankruptcy case if the judge feels doing so is necessary.
However, time is of the essence when filing a motion to reinstate. While the time to file a motion to reinstate varies by state, most states require you to file the motion within 10 to 14 days after the dismissal and before the dismissal order is finalized.
To file a motion to reinstate your case, include the reason why your case was dismissed and explain any mistake you made and how you did rectify the mistake or how you intend to do so. For example, if you missed a Chapter 13 payment, explain to the court why you missed the payment and that you can make it up. You can send money to the Chapter 13 trustee while your motion is pending. In a Chapter 7 case, if your dismissal was simply due to a failure to file a credit counseling certificate, you can simply ask that the case be reinstated and file the certificate at the same time, and it will likely be granted.
If your case was dismissed for more complicated reasons, you may have to appear before the judge.
Effect of Dismissal
If your bankruptcy case is dismissed and you do not receive a bankruptcy discharge, your bankruptcy will still appear on your credit report. A Chapter 7 bankruptcy will typically stay on your credit report for 10 years. If you don't get reinstated and file another bankruptcy later on, both bankruptcy cases will appear on your credit report.
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