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 laws or local rules, the bankruptcy court can dismiss your bankruptcy case. Read on to learn more about the reasons the court might dismiss your bankruptcy case.
You'll find a complete overview of the bankruptcy process in Filing For Bankruptcy.
When most people file for bankruptcy, the goal is to obtain a discharge (forgiveness) of debt. But that doesn't always happen. A bankruptcy dismissal closes your bankruptcy case, and if it occurs before you receive a discharge, it will mean that:
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 a number of factors, including the reason for the request, whether you filed a Chapter 13 bankruptcy or a Chapter 7 case, where you're at in the bankruptcy process, and how the dismissal will affect your creditors.
(For detailed information about the different dismissal types, read What Is the Difference Between a Bankruptcy Dismissal and a Discharge?)
Bankruptcy cases get dismissed for a variety of reasons ranging 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 might dismiss your bankruptcy case.
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 will typically dismiss your case, deny your discharge, and report you for further investigation.
Your disposable income must be low enough to pass the means test before you qualify for a discharge. The bankruptcy means test compares your average income for the six-month period before 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, you still might qualify. You'll be allowed to deduct the 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 will likely 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.)
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.)
If you want to file for bankruptcy, you must pay a filing fee to the court for the administration of your case. 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.
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 are also required to 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 to the trustee at least one week before your meeting of creditors (also called the 341 hearing), along with paycheck stubs, and bank account statements. 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.)
When you file for bankruptcy, you must 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. You'll also present proof of your identification. In general, the meeting of creditors will last only a few minutes, and creditors rarely show up. But if you fail to attend your meeting of creditors, the trustee will likely ask the court to dismiss your bankruptcy case.
(Find articles on the Meeting of Creditors in Bankruptcy.)
In Chapter 13 bankruptcy, you can keep all of your property (but this isn't a freebie—you'll have to pay for the nonexempt portion), but you must pay back some or all of your debts through a Chapter 13 repayment plan. Chapter 13 plans typically last three to five years, and the court will enter your discharge upon successful completion of all plan payments. If you stop making your Chapter 13 plan payments, the court will typically dismiss your bankruptcy.