When you file for bankruptcy, you must be honest in your bankruptcy papers, follow all federal and local rules, and attend all mandatory hearings. If you commit fraud or fail to comply with any applicable laws or local rules, the bankruptcy court or trustee can dismiss your bankruptcy case. Read on to learn more about the reasons the court or trustee may dismiss your bankruptcy case.
Reasons the Court or Trustee May Dismiss Your Bankruptcy
There are many reasons why your bankruptcy case may be dismissed. Typically, causes range from intentional misconduct (such as fraud) to simply failing to file the correct forms with the court. Below are some of the most common reasons the court or trustee might dismiss your bankruptcy case.
(To learn more about who the trustee is and what his or her role is in your case, see The Bankruptcy Trustee.)
Committing Bankruptcy Fraud
When you complete your bankruptcy papers, you must tell the truth and accurately disclose all of your income, assets, liabilities, and other required financial information. Bankruptcy fraud is a serious offense that can result in the loss of your discharge, criminal fines, and incarceration. If you lie on your bankruptcy papers or otherwise commit fraud, the court or trustee will typically dismiss your case, deny your discharge, and report you for further investigation.
Failing the Means Test
To qualify for Chapter 7 bankruptcy, your disposable income must be low enough to pass a means test. The bankruptcy means test compares your average income for the six month period prior to filing your case against the median state income for a similar household.
If your income is below the state median, you qualify automatically. However, if it is above median, the means test uses national and local living expense standards for your area (as well as some of your actual expenses) to determine whether you qualify. If you fail the means test, the court or trustee will either dismiss your Chapter 7 bankruptcy or give you the option to convert to a Chapter 13 case.
(Find comprehensive information about the means test in Chapter 7 bankruptcy.)
Not Completing the Mandatory Credit Counseling Course Prior to Bankruptcy
Bankruptcy law requires all debtors to complete a credit counseling course prior to filing their case. Generally, this is an easy course that can be completed online or over the phone. When you complete the course, you will receive a certificate of completion which must be filed with the court. If you file for bankruptcy before completing the required credit counseling course, your case will be dismissed. (Learn more, in our Credit Counseling Before Bankruptcy section.)
Not Paying the Court Filing Fees
If you want to file for bankruptcy, you must pay a filing fee to the court to administer your case. (Get the rundown on bankruptcy fees and costs.) In Chapter 7 cases, if you have little or no income, you may apply for a waiver of your court fees. The court will take into account your income and expenses when granting or denying your waiver. Unless you receive a waiver, the court will dismiss your case if you fail to pay the required filing fees. (See our information on the Chapter 7 Fee Waiver Application.)
Not Filing All Required Forms or Submitting All Supporting Documents
Filing for bankruptcy requires disclosing all of your financial affairs to the court. This means that you must complete a lengthy set of forms including a bankruptcy petition, schedules, and other required forms. If you fail to file all required forms with the court, your case will typically be dismissed.
After filing your case, you are also required to submit certain supporting documents to the trustee such as tax returns, paystubs, and other documents to verify the information in your bankruptcy papers. Each trustee has different supporting documentation requirements. However, at a minimum, you must submit your most recent federal tax return to the trustee at least one week prior to your meeting of creditors (also called the 341 hearing). Failure to submit all required documents may result in dismissal of your case.
(Find out about the bankruptcy forms and other documents you must file in bankruptcy.)
Not Attending Your Meeting of Creditors
When you file for bankruptcy, you are required to attend a mandatory hearing called the meeting of creditors. The purpose of this hearing is to allow the trustee and your creditors to ask you questions under oath about your bankruptcy papers and financial affairs. In general, meetings of creditors last only a few minutes and creditors rarely show up. But if you fail to attend your meeting of creditors, the trustee will typically dismiss your bankruptcy case. (Find articles and Q&As on the Meeting of Creditors in Bankruptcy.)
Failing to Make Your Chapter 13 Plan Payments
In Chapter 13 bankruptcy, you are allowed to keep all of your property but you must pay back some or all of your debts through a repayment plan. Chapter 13 plans typically last three to five years and your discharge is only entered upon successful completion of all plan payments. If you stop making your Chapter 13 plan payments, the court will typically dismiss your bankruptcy. (Find information on Chapter 13 bankruptcy.)