Can I Dismiss a Chapter 13 Bankruptcy and File a Chapter 7 Later?
- A Chapter 13 debtor has the right to dismiss his case at any time if the case wasn't previously converted from another chapter of bankruptcy. A debtor can elect to dismiss the case under 11 U.S.C. §1307(b) of the bankruptcy code. The Federal Rules of Bankruptcy Procedure requires a motion be submitted to the court requesting dismissal of the Chapter 13 case. Contact the bankruptcy court to find out if the motion needs to be written or if the court only requires that a form be filled out and filed. If an attorney is handling the case, the attorney will complete and file the paperwork on behalf of the debtor. The court will close the case and vacate any scheduled hearings from the court calendar after the bankruptcy judge approves the motion.
- Collection attempts from creditors will begin once the case is dismissed. The creditors can exercise their rights under the terms of the contract and applicable state laws when bankruptcy protection no longer exists. Creditors may file lawsuits to get court judgments or begin foreclosure and repossession proceedings. Recording judicial liens on real property or garnishing wages are other options the creditors may pursue. The creditors can continue collection activity until the Chapter 7 case is filed.
- Chapter 7 bankruptcy is available to debtors who cannot afford to pay off some of their debts over a period of time. A means test was created with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The means test determines if the debtor qualifies for Chapter 7 bankruptcy based on the debtor's average monthly income and living expenses. If the debtor's income is less than or equal to the state's median income level for his household size, he can file for Chapter 7 bankruptcy. When the debtor's income is greater than the state's median income level, he may still qualify for Chapter 7 if he has very little to no disposable income after paying for basic living expenses.
- Converting the Chapter 13 case to a Chapter 7 case is an option if the debtor currently qualifies for Chapter 7 bankruptcy. Bankruptcy provision 11 U.S.C. §1307(a) allows debtors to convert a Chapter 13 case to Chapter 7. As of 2011, converting a case costs $25, but filing a new Chapter 7 case costs $299. File a Notice of Conversion with the bankruptcy court. The debtor should also file an updated Statement of Current Monthly Income form, along with updated Schedule I and Schedule J forms to reflect any changes in income and expenses. The debtor maintains bankruptcy protection from creditors during the conversion. The court will promptly issue a discharge if there are no pending issues with the case.
