Reasons the Court Might Dismiss Your Bankruptcy Case

Some reasons a bankruptcy court will dismiss your bankruptcy case include committing fraud or failing to comply with laws or local rules. Why? When you file for bankruptcy, you must be honest in your bankruptcy papers, follow all federal and local rules, and attend all mandatory hearings. Read on to learn more about why the court might dismiss your bankruptcy case.

What Does a Dismissed Bankruptcy Mean?

When most people file for bankruptcy, the goal is to obtain a "discharge" and erase debt. Typically, a bankruptcy case ends shortly after the court issues a discharge and closes the case.

However, the bankruptcy court sometimes dismisses a case without issuing a debt discharge. This usually occurs when the filer fails to take some required action or commits wrongdoing.

Example. After Jess filed for Chapter 7 bankruptcy, she forgot to file a certificate proving she took the post-filing debtor education course. After the final deadline passed, the bankruptcy court dismissed her bankruptcy case without issuing a debt discharge. Jess had to repay the Chapter 7 filing fee to reopen the case so she could file the required certificate and receive the discharge.

For detailed information, read What Is the Difference Between a Bankruptcy Dismissal and a Discharge?

What Happens When the Bankruptcy Court Dismisses the Case?

When the bankruptcy court dismisses your case, you'll lose the automatic stay protection prohibiting creditors from collecting debts. You'll also continue to be liable for your debts.

If the court dismisses the bankruptcy case because of a harmless mistake, it's a "dismissal without prejudice," and you can file for bankruptcy again. However, filing repeatedly will also cause you to lose the automatic stay protection.

If a bankruptcy judge dismissed your case because you attempted to take advantage of creditors somehow, you might not be able to file again for some time.

Why Would a Bankruptcy Be Dismissed?

Bankruptcy cases get dismissed for various reasons ranging from intentional misconduct to simply failing to file the correct forms and documents with the court or trustee. Below are some of the most common reasons the court might dismiss your bankruptcy case.

Committing Bankruptcy Fraud

When you complete your bankruptcy papers, you must tell the truth and accurately disclose 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 will typically dismiss your case, deny your discharge, and report you for further investigation.

Not Completing the Mandatory Education Courses

Bankruptcy law requires all debtors to complete a credit counseling course before filing a case and a debt management course before receiving a discharge. When you finish each course, you'll receive a certificate of completion to file with the court. If you don't file either certificate promptly, the court will dismiss your case.

Learn more in Credit Counseling & Debtor Education Requirements in Bankruptcy.

Not Paying Bankruptcy Fee Installment Payments

If you want to file for bankruptcy, you must pay a filing fee to the court to administer your case. In Chapter 7 cases, you can ask the court to allow you to pay the fee in four installments. If the court agrees but you miss one of the scheduled fee payments, the court will dismiss your case for failing to pay the required filing fees.

Learn about bankruptcy fee waivers and installment payments.

Not Filing Required Forms and Supporting Documents

Filing for bankruptcy requires disclosing all of your financial affairs to the court. You must fill out a set of bankruptcy forms, including a bankruptcy petition, schedules, and other required forms. If you fail to file all required forms, the court will dismiss your case.

After filing your case, you must also submit certain supporting documents to the trustee, such as tax returns, pay stubs, 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, paycheck stubs, and bank account statements.

Depending on the jurisdiction, the documents must be sent to the trustee or filed with the court at least one week before the 341 meeting of creditors, the one hearing all bankruptcy filers must attend. Failure to submit all required documents, known as "521 documents," could 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 must attend a mandatory hearing called the meeting of creditors. This hearing allows the trustee to ask questions under oath about your bankruptcy papers and financial affairs. You'll also present proof of your identification.

In general, the meeting of creditors will last a few minutes, and creditors rarely show up. But if you fail to attend your meeting of creditors without making prior arrangements, the trustee will ask the court to dismiss your bankruptcy case.

Why Would a Chapter 13 Be Dismissed?

Most Chapter 13 cases are dismissed because the debtor fails to make monthly payments. In Chapter 13 bankruptcy, the debtor must pay back some or all of the debts through a repayment plan. If the debtor stops making the plan payments, the court will dismiss the case.

Chapter 13 plans typically last three to five years, and the court will enter your discharge and erase qualifying balances upon successful completion of all plan payments.

The Dismissal Process in Bankruptcy

The process starts when the debtor, trustee, or creditor files a motion requesting the dismissal. But, just because you ask for a voluntary dismissal, or another party asks for an involuntary dismissal, doesn't mean that the court will grant the request and close the case.

The court's decision will depend on several factors, including the reason for the request, whether you filed a Chapter 13 bankruptcy or a Chapter 7 case, where you're in the bankruptcy process, and how the dismissal will affect your creditors.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we want to ensure you find what you need. Below, you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.