Chapter 13 bankruptcy allows consumers to repay their creditors over a period of up to five years while stopping additional collection actions, such as foreclosures, garnishments and collection calls. However, around two-thirds of the Chapter 13 cases in the United States are dismissed before all of the payments are made.
There are as many reasons for cases getting dismissed as there are consumers seeking this type of protection. Most stem from the fact that five years is a long time for nothing to go financially wrong in a person's life. People get sick, lose their jobs and have unexpected large bills, all of which can derail a Chapter 13 plan. If your Chapter 13 bankruptcy plan has been dismissed, don't despair. You still have options.
What can you do if your Chapter 13 bankruptcy case is dismissed?
1. You can convert the case to a Chapter 7 bankruptcy. A Chapter 7 bankruptcy is a liquidation bankruptcy, where all of your assets are sold to satisfy your creditors. There are many exemptions, such as your primary residence, retirement plan and a reasonable value in your car. However, unlike Chapter 13 bankruptcy, this type of bankruptcy doesn't freeze any collection action. Priory debts, such as mortgage payments and taxes, can still be collected.
2. You can re-file your Chapter 13 case immediately. In most states, you can refile your Chapter 13 case immediately after it is dismissed if you can show a change in circumstance that will allow you to make your payments this time. This can be a new job with a higher income, getting married and sharing your living expenses with another wage earner or reducing your living expenses dramatically.
3. You can re-file your Chapter 13 case after one year. If your circumstances haven't changed dramatically, you can wait one year and re-file your Chapter 13 case without having to show a change in your circumstances. By doing this, you'll again get the stay of collection action, but you'll have to start an entire new five year plan, not just start over where you stopped in the old plan.
If your Chapter 13 case has been dismissed, it makes sense to get a fresh attorney (such as Thomas A Blake) to take a look at the case. You may be able to save your home and your other assets by re-filing your case and/or by converting your case to a Chapter 7 bankruptcy. Many attorneys offer free consultations and will roll most of their fees into the Chapter 13 plan.
