When you file for bankruptcy relief, you may be referred to as the ‘petitioner’ or the ‘debtor.’ Unfortunately, even if you have good reasons to file bankruptcy, there is no guarantee that your debts will be forgiven. For example, if you do not follow the proper procedures or neglect to comply with the bankruptcy laws, your case could be dismissed. A Chapter 7 bankruptcy case is rarely dismissed; however, dismissal for a Chapter 13 case is rather common. The reason for the dismissal determines whether a case is dismissed with prejudice or without prejudice.
Protecting the Petitioner During the Bankruptcy Process
As you move through the bankruptcy process, you are protected from your creditors by an injunction that is referred to as an ‘automatic stay.’ This injunction is used to protect you from nearly all the collection activities that your creditors use. The automatic stay goes into effect the day that you file your case.
What to Expect Following a Chapter 7 or Chapter 13 Bankruptcy Discharge, or Dismissal
If your case is successful and you obtain a discharge, you are not required to pay back any of the debts that were discharged in your bankruptcy case. However, if you are not successful and your case is dismissed, it is deemed void, which means that you are still liable for all your debt. In addition, directly following the dismissal, your creditors are permitted to initiate or continue any litigation (pursuant to Ohio state law) to garnish your income or foreclose on your property.
Reasons for a Dismissal
Once you have filed for bankruptcy, you are required to follow certain procedures to obtain a discharge and be relieved of your debts. If these procedures are not followed, your case may be dismissed.
Typically, the majority of Chapter 7 and Chapter 13 bankruptcy cases are dismissed because the debtor fails to:
- file the necessary forms with the court;
- meet the established deadlines for documentation, as set forth by the court;
- provide the bankruptcy trustee with the required supporting documentation for his or her case;
- appear at the meeting of creditors;
- make timely plan payments (in a Chapter 13 bankruptcy case); or
- successfully complete a financial management course (debtor education).
What Does It Mean If a Bankruptcy Case Is ‘Dismissed without Prejudice’?
When a Chapter 7 or Chapter 13 bankruptcy case is dismissed without prejudice, the petitioner can immediately refile. Most of the bankruptcy cases that are dismissed without prejudice occur due to issues related to procedure. For example, if the petitioner fails to file the necessary forms with the court.
Although the petitioner can refile immediately following this type of dismissal, he or she may need to file a motion to extend or impose the ‘automatic stay’ in the refiled case. Otherwise, collection activities will resume.
Limits on Automatic Stay
Even when a bankruptcy case is dismissed without prejudice and the petitioner refiles right away, there may be limits placed on the automatic stay. For example, if a case is refiled within 12 months of dismissal, the automatic stay is limited to 30 days; however, if the petitioner had two or more bankruptcy cases dismissed within 12 months of the current re-filing, automatic stay will not be granted.
What Does It Means When a Case Is ‘Dismissed with Prejudice’?
Whereas a case dismissed without prejudice can be refiled immediately, the opposite is true when a bankruptcy case is dismissed with prejudice. A petitioner whose case is dismissed in this manner may not re-file for a specific length of time or, in some cases, prohibited from ever filing bankruptcy on the debts that existed at the time of the initial filing.
Possible reasons that lead to a bankruptcy case being dismissed with prejudice include, the debtor:
- filed his or her case in bad faith to delay creditors;
- tried to hide assets;
- willfully disregarded orders from the court; or
- abused the bankruptcy system in some other way.
According to bankruptcy law, a debtor whose case was dismissed with prejudice cannot file another bankruptcy case within 180 days of the prior case if:
- the debtor requested that the case be dismissed after he or she filed a motion for relief from an automatic stay; or
- the debtor willfully failed to follow the court’s orders.
Since bankruptcy judges are given far-reaching discretion when it comes to dismissing bankruptcy cases, he or she can determine the penalty the debtor receives based on the severity of the acts that led to the case being dismissed with prejudice.
Ideally, a Bankruptcy Plan Will Lead to a Discharge
When completed successfully, a Chapter 13 or Chapter 7 bankruptcy plan absolves the petitioner of all the debt listed in his or her case. Therefore, creditors are not permitted to pursue the individual for payment (as applicable by Ohio state law). Once a debt has been discharged, if a creditor continues to pursue the petitioner for payment, he or she should talk to a bankruptcy lawyer.
If you have bankruptcy questions or want to learn more about how to file for bankruptcy, contact the Chris Wesner Law Office at 1.855.339.8001 today.