In Bankruptcy Questions, todays question


Sometimes you want a do-over. In golf it’s called a mulligan. In bankruptcy, it’s called “good luck with that.”

Whether or not you can dismiss your bankruptcy depends on a number of things, the most important of which is what chapter you’re in. If you’re in Chapter 13, you’re in luck. A Chapter 13 can be dismissed or converted to a Chapter 7 at any time. All you (or your attorney) have to do is file a Notice of Dismissal, if you want out all together; or a Notice of Conversion, if you want to switch to a Chapter 7.

Chapter 7, on the other hand, isn’t as easy. In fact, it might be impossible. In order to get a dismissal of a Chapter 7 you have to get the court’s approval. That requires that you demonstrate that everyone, you as the debtor and your creditors, will be better off if you dismiss.

The most common reason for wanting to dismiss a Chapter 7 is that the debtor realizes that she’ll lose some assets when the trustee sells them. It’s hard to convince the court that creditors will be better off if the case is dismissed when those creditors are looking at a source of partial repayment from the bankruptcy estate. In those cases, it’s well-nigh impossible to get a dismissal.

On the other hand, if there are no assets to be distributed in Chapter 7, the court will want to know why you, as a debtor, will be better off if the case is dismissed and creditors are free to take judgment, garnish wages and do all the other nasty things creditors can do. If you remain in bankruptcy and receive a discharge, you’ll be better off.

Filing bankruptcy, especially Chapter 7, isn’t something to be done lightly. It’s not a situation where you can say, “let’s give it a try. We have nothing to lose.” Before you file, make sure you understand the implications of what you’re doing.

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