After years of dealing with debt, seeking advice from debt counselors and making the tough decision to declare bankruptcy, the last thing that you want to happen is to have your case tossed by the courts.
But that’s exactly what happens for hundreds of Americans each year when their case is dismissed. It’s not just hours of paperwork that goes down the drain, either. Debt collectors will be able to come after you as soon as your case is dismissed, and delinquencies and late fees will start to mount once more.
Don’t be one of the applicants that have their case tossed. By taking the time to read this guide to understand why bankruptcy dismissal happens, you can take the necessary steps to prevent it from happening to you.
Why does bankruptcy dismissal occur?
It is all too easy to make mistakes when filing for bankruptcy. The process is incredibly complicated with dozens of forms to fill in and hoops to jump through. Combine that with the stress of your financial situation, and it’s easy to see how your application can go awry. Mistakes aren’t the only cause for dismissal though. Misrepresenting your situation, such as pretending you have more debt than you do, can also lead to a judge tossing your case. As can all of the following reasons:
- Failure to comply with or attend the court
- Not completing credit counseling
- Late or inaccurate filing
- Failure to pay the associated fees
- Prior instances of dismissal or discharge
- Violating court procedure
- Lack of documentation
- Failure to adhere to a Chapter 13 payment plan
- Failing of means tests
Types of bankruptcy dismissal
There are three types of dismissal in total: voluntary dismissal, dismissal without prejudice and dismissal with prejudice. It is important to know the difference as the way in which your case is dismissed can have a significant impact on your ability to file again.
You can dismiss your case yourself if you wish. This typically happens when you find the means to pay your debts and would rather do that than go through with bankruptcy. This request isn’t always granted, however. And if you change your mind again after your case was dismissed, reapplying can be very difficult.
Dismissal without prejudice
If you commit an honest mistake on your application or some unforeseen circumstance causes your cause to be tossed, it is dismissed without prejudice. The good news is that you can file another petition immediately but doing so within a year will limit the automatic stay against debt collectors to 30 days.
Dismissal with prejudice
Trying to cheat or game the system will result in dismissal with prejudice. You will have to wait a predetermined period, typically six months, before filing again and, in some cases, debts existing at the time of your first filing may not be eligible for discharge.
What happens after a dismissal?
Bankruptcy dismissal puts you in the same situation as you were in immediately before filing, and this can be devastating for several reasons.
Firstly, all of the time, money, and effort that you spent preparing and filing your case is irretrievably lost. This includes all of the fees you paid to your lawyer and to the courts. Your financial situation will likely worsen, too. Not only will your debts remain with you and continue to grow, but an application to file for bankruptcy will remain on your credit score and can affect your rating.
Debt collectors will also be able to come after you again with the full backing of the law. That’s because the stay against creditors that you were granted when applying for bankruptcy is lifted the second your case is tossed meaning you can face foreclosure, lawsuits, and repossession.
What should you do after a dismissal?
There is a chance to get your case reinstated if it was dismissed without prejudice, but you must act quickly. At first, dismissals are rarely final, and courts typically provide a small window of time where you can continue to plead your case or put forward a motion to reconsider. By putting forward this motion, you will also need to rectify the reason for the dismissal.
When the motion to dismiss is final, you can either appeal or pay to file a new case immediately as long as your case was dismissed without prejudice. If it was dismissed with prejudice, however, you will need to wait six months before applying again.
How to avoid dismissal
If you are honest, there is no reason, apart from human error, for your case to get dismissed. As such, one of the best things you can do is to invest your remaining money into a successful bankruptcy lawyer. Not only will they file the paperwork on your behalf, but a good lawyer will also make sure that you meet all of the eligibility criteria for bankruptcy before applying and that there are no other factors that could lead your case to be dismissed.