Chapter 13 bankruptcy requires you to make regular payments on your debts each month to the trustee assigned to your case. If you miss a payment or if the trustee determines that there's a problem with your bankruptcy filing, he can file a motion to have your case dismissed. Dismissal can have serious consequences, so you need to know what your options are if the trustee files a motion to dismiss.
Opposing the Motion
If you receive notice that the trustee has filed a motion to dismiss, the first thing you should do is to contact your attorney if you've hired one. Your attorney can help you file an objection to the dismissal. You must file the motion within the time frame specified by your state's bankruptcy laws. When you file the motion, include your reasons for opposing the dismissal, along with any supporting documentation you may have. For example, if the trustee claims that you missed a payment, and you know you haven't, you should be prepared to submit copies of cancelled checks or pay stubs showing a payroll deduction.
Chapter 7 Conversion
If your motion to oppose the dismissal is unsuccessful, you can attempt to convert your case to a Chapter 7 filing. Keep in mind several key differences between Chapter 13 and Chapter 7. First, you must be able to qualify for Chapter 7 under the means test. This test measures your median income against median income limits by family size. Second, you risk losing some or all of your assets if can't exempt them under state or federal exemption guidelines. Lastly, Chapter 7 can stay on your credit for up to 10 years, rather than the seven years that Chapter 13 typically lasts.
Refiling Chapter 13
If you're not eligible to convert to Chapter 7, you can let the trustee's motion to dismiss go through and refile your Chapter 13 petition later. If your bankruptcy case was dismissed because you failed to make your payments on time or you missed key court hearings, the federal bankruptcy code requires that you wait 180 days before filing a new petition. In rare cases, the trustee may recommend that the court prohibit an individual from refiling if it's suspected that the initial petition was filed with the intent to defraud creditors or otherwise violate the federal bankruptcy code.
Consequences of Dismissal
The most serious consequence of having your bankruptcy case dismissed is that you lose your automatic stay protection. When you file a Chapter 7 or Chapter 13 petition, the court puts an automatic stay in place that prevents your creditors from taking any type of legal action against you. This includes filing a lawsuit, seeking a wage garnishment, placing a lien on your property or freezing your bank account. If your case is dismissed, your attorney can file a motion to extend the stay for another 30 days, which gives you time to evaluate your options for dealing with your debts.
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