Once you file for Chapter 7 bankruptcy, you don’t have an automatic right to dismiss it voluntarily. Whether you’ll be allowed to dismiss your Chapter 7 bankruptcy will depend on:
A Chapter 7 bankruptcy case isn’t like other court cases. If you file for Chapter 7 bankruptcy, you must be prepared to complete it because, unlike Chapter 13 bankruptcy, you don’t have the right to back out.
Generally, you can only dismiss your Chapter 7 bankruptcy if you have a good reason (good cause). For instance, if you find out that you’ll lose property that you thought you could keep, you can’t simply dismiss your case. However, if you find yourself in a bind, talk to a bankruptcy lawyer—an attorney might find an issue that rises to the level of good cause. But again, don’t count on it.
(Learn about property you can and cannot keep in Chapter 7 bankruptcy by reading What Is Exempt Property?)
The moment you file for Chapter 7 bankruptcy, all of your assets become property of the bankruptcy estate under the control of the appointed bankruptcy trustee. The trustee must sell your nonexempt property—the property you’re not entitled to keep—to pay your unsecured creditors.
If you own nonexempt assets that can be sold to pay your creditors, the creditors will be prejudiced (negatively affected) by dismissal of your Chapter 7 bankruptcy. They won’t get paid. In that case, the court will typically not allow you to dismiss your case unless you can show cause and an alternative way to satisfy your creditors.
(For more information about exempt assets, see Bankruptcy Exemptions.)
In bankruptcy court, your financial interests will be of lesser importance than those of your creditors. That’s not to say that you’ll never receive permission to dismiss your case—it can happen. However, in most cases, the court will deny your request for dismissal unless you have a compelling reason and can show that you can pay your creditors outside of bankruptcy.
Even if the court denies your request to dismiss your Chapter 7 bankruptcy, there’s a chance that you’ll be able to convert your case to a Chapter 13 bankruptcy. Unless you are trying to convert your case in bad faith, most courts will allow you to convert if you have regular income and can show that you can afford a Chapter 13 bankruptcy.
If you have nonexempt assets, converting your case can allow you to keep your property and pay back a portion of your debts through a Chapter 13 repayment plan.