Chapter 13 Dismissal

• Under a Chapter 13, your bankruptcy can be dismissed for several reasons. For instance, your Chapter 13 bankruptcy could be dismissed by the bankruptcy court; common reasons are nonpayment of bankruptcy filing fees or failure to make the payments outlined in the debt repayment plan you filed with the court. In addition, you reserve the right to dismiss your bankruptcy petition at any time. This may be something you choose to do because you want to change to a Chapter 7 bankruptcy -- a complete liquidation -- your financial situation changes, or you are able to repay your debts earlier than forecasted. This last is only possible if no debts were discharged and you are repaying your creditors in full.
  
  

What Happens After Dismissal

• After your bankruptcy is dismissed, for whatever reason, your creditors will be able to keep any amounts you have paid them to date. Your bankruptcy trustee will refund any amount that had not been disbursed, less various administration fees. In addition, if you have not paid your debts in full, your debts will revert to their pre-bankruptcy state and you will be liable for any remaining balance. After bankruptcy dismissal, you will also no longer enjoy the legal protections afforded by bankruptcy.
  
  

Bankruptcy Protections

• When you file bankruptcy, all your creditors are automatically and immediately prohibited from all collections activities. This means that your creditors cannot sue you, garnish your wages, repossess your property, evict you, foreclose on your home, etc. However, as soon as your bankruptcy is dismissed, you and your paycheck are fair game. As such, any liens that you have on your assets will go into effect; your creditors will have the right to recover the asset itself or its value. In order to avoid this, a Motion to Avoid a Lien for each asset in question would have to be filed and approved.
  
  

Avoiding Property Liens

• After a Chapter 13 bankruptcy is dismissed or satisfied, a Motion to Avoid a Lien will need to be filed to protect liens on property. Liens are not automatically discharged in the bankruptcy process. A Motion to Avoid a Lien must be filed before the bankruptcy is finalized; otherwise, you will incur additional fees to reopen your case and file the necessary paperwork. In the case of liens against property, an appraisal will need to be completed.