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I Received Notice that my Bankruptcy Case is Being Dismissed, What Should I do?

August 21, 2013

While in a bankruptcy case a party can move to have the case dismissed. Dismissal put simply, ends the bankruptcy case and you no longer have the protection of the bankruptcy code and its automatic stay.  When your case is dismissed your creditors can restart collection actions, this means that they can call you, file lawsuits and/or if you are behind on your house or car payments, then they can foreclose or repossess the collateral.  If you get a notice that your bankruptcy case is in the process of being dismissed the first thing to do is CONTACT YOUR ATTORNEY. There are ways to avoid a dismissal, but without first speaking with your attorney it may not be avoidable.

There are a variety of reasons why your bankruptcy case may be up for dismissal; below are the most common examples and some possible solutions to resolve a dismissal.

The most common dismissal is for failure to make plan payments. In a chapter 13 case, if you fall behind on your plan payments a party, typically the Trustee, can move to dismiss your case.  In order to avoid dismissal you will need to get current on the plan payment. The ideal solution is for you to make a large payment to get caught up, but this is not always possible. You may also be able to work out a short term payment plan with the Trustee, whereby you send in an increased payment for a short number of months until you pay off the amount you were behind on. Another option may be to modify your chapter 13 plan and try to pay the delinquency over the remainder of your plan. There are a variety of options, so speak to your attorney about which is best for your case.

Another reason for dismissal is failure to confirm your chapter 13 case. This will typically be filed if you miss your first plan payment, failed to provide documents, file amendments, failed to conclude your 341 meeting, or other confirmation issues. The best way to resolve these dismissal actions is to work with your attorney to make sure they have all the required documentation and information needed to confirm your case. If you fail to get the case confirmed, the case can be dismissed.

Throughout a chapter 13 case the debtors are required to stay current with their ongoing income tax obligations. The IRS can ask for your case to be dismissed if you have a large tax liability and are unable to timely resolve the tax debt. The reason for this type of dismissal is that the bankruptcy code wants debtors to avoid a double insolvency; put in another way, being bankrupt while in bankruptcy which frustrates the “fresh start.” A debtor will want to make sure before the case is filed that their withholding is sufficient to cover any tax liability, or that they send in quarterly taxes to the IRS to cover any potential liability. If something happens and you do have a large liability, your attorney can work with the IRS to possibly include the post petition liability in the plan. Section 1305 of the bankruptcy code allows some post-petition priority debts to be included in the chapter 13 plan. If this happens to you, it is important to speak to your attorney because the IRS and the Trustee must agree to allow you to include the IRS debt, and they will want to insure that a future tax debt does not arise.

A bankruptcy dismissal is a very serious matter. If you receive notice that a party is seeking dismissal, contact your attorney as soon as possible. Responding quickly to these matters is essential in working out a resolution. If you have any questions regarding how chapter 13 works contact the experienced attorney’s at Fear Nachawati here for a free consultation, or call our office at 1.866.705.7584.


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