Can You Dismiss Your Chapter 7 Bankruptcy After You've Filed?

You don't have an automatic right to dismiss a Chapter 7 bankruptcy case after filing. Whether you'll be allowed to dismiss your Chapter 7 bankruptcy will depend on whether you own nonexempt assets, whether dismissal will prejudice your creditors, your reasons for wanting the dismissal, and the policies and procedures in your jurisdiction.

You Don't Have the Right to Dismiss a Chapter 7 Case

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. (11 U.S.C. § 349(a).)

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.

You Can't Dismiss a Chapter 7 If Creditors Will Suffer

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. (11 U.S.C. § 541(a).) The trustee must sell your nonexempt property—the property you're not entitled to keep because it isn't protected by a bankruptcy exemption—to pay your unsecured creditors.

For instance, suppose you own nonexempt assets that can be sold to pay your creditors. In that case, the creditors would be prejudiced (negatively affected) by the dismissal of your Chapter 7 bankruptcy. They won't get paid.

Obtaining Court Permission to Dismiss in Chapter 7

In bankruptcy court, your financial interests will be of lesser importance than those of your creditors. Typically, the court won't allow you to dismiss your case unless you have a compelling reason (show cause) and an alternative way to satisfy your creditors. That's not to say that you'll never receive permission to dismiss your case. It can happen.

Converting to Chapter 13 When You Can't Dismiss in Chapter 7

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. (11 U.S.C. § 706(a).) Unless you are trying to convert your case in bad faith, most courts will allow you to convert if.

You'll need a steady income and be able to afford a Chapter 13 bankruptcy. Specifically, you'll need to earn enough to pay all required Chapter 13 plan obligations.

One benefit of converting is that if you have nonexempt assets, converting your case can allow you to keep your property and pay back a portion of your debts through the plan. Another benefit of converting is that filers have the right to dismiss a Chapter 13 case.

Need More Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.