Bankruptcy offers protection from your creditors and a chance to achieve your desirable outcome. But when dismissal looms, your future may not look so bright.
When you file for bankruptcy, you get the benefit of knowing that your creditors can’t take any action against you.
In return for the protections of the bankruptcy laws, you’ve got certain responsibilities. Fail to live up to your end of the bargain and you may find your case kicked out of court.
That’s dismissal – getting your bankruptcy case thrown out.
Before you decide whether that’s a good thing or not, you need to know what dismissal means for you down the road. These are the cold, hard realities of dismissal.
Creditors Can Take Action After Dismissal
When you filed your case, your creditors got notification that they couldn’t take action against you.
- No phone calls.
- No collection letters.
- Foreclosures had to stop.
- The car couldn’t be repossessed.
- Wage garnishees were halted.
- Bank account levies were lifted.
Though some types of legal action could continue – divorce-related matters, child custody and criminal cases to name a few – for the most part, it was as if someone had sprinkled magic pixie dust.
You weren’t officially out of debt but it sure felt that way.
Once a bankruptcy case is dismissed, however, that magic pixie dust is washed away.
- Creditors can start calling again.
- The car can be repossessed.
- The wage garnishee will reappear.
- The bank account can be levied.
- The foreclosure will continue.
And you’ll still owe the debts that you had hoped to wipe away.
You May Not Be Able to File Bankruptcy Again
There are different types of dismissal. Some dismissals allows you to file for bankruptcy again right away, others may prevent you from filing again for a period of time.
And if the judge decides there’s a good reason, you can be prevented from filing for bankruptcy at all again in the future and wiping out these debts.
If You Can File, Your Protection May Be Limited
If you have a case dismissed once in a year, the automatic stay may be temporary the second time around unless the judge extends it.
And if you have more than one bankruptcy case dismissed in a year, you may not get the protection of the automatic stay at all.
A Controllable Force
Don’t forget the beauty of a bankruptcy dismissal.
In a Chapter 13 repayment bankruptcy you can voluntarily dismiss your case if you no longer need the court’s protection.
You decide to sell the house or refinance, so you don’t need to worry about the pending foreclosure anymore. Or a windfall makes it possible to repay your debts on your own.
You don’t get the option to voluntarily dismiss a Chapter 7 bankruptcy, but chances are good that if you’re in a Chapter 7 then it’s for a good reason. Don’t mess up your chance to end your bill problems – pay attention to what your supposed to do, and things will work out for you.
In the end, it comes down to understanding the impact of dismissal. Use it as a tool when necessary, and avoid it otherwise.