Filing bankruptcy is a legal process. If you change your mind after you start your case, you have to follow legal procedure to get out of it. In some cases, the court will not permit you to cancel your bankruptcy. However, if you can demonstrate that dismissing your bankruptcy will not hurt your creditors, the court can allow it. Canceling your bankruptcy can have consequences you may not intend. For one thing, your bankruptcy filing will remain on your credit report for up to 10 years, even if you later dismiss the case without receiving a discharge.
File to Dismiss
To kick off the process, you'll need to file a motion to dismiss your case. This step is the same regardless of whether you filed a Chapter 7 or a Chapter 13 bankruptcy, which are the two most common types of consumer bankruptcy. Filing a motion is a legal procedure that you may want to consult an attorney to undertake. You must file Bankruptcy Form 20A with the court as a Motion to Dismiss your bankruptcy case. Follow the instructions on the form to ensure that all relevant parties receive a copy of your motion.
Protect Your Filing Ability
Check to see if the court has restricted your future filing ability if you originally filed Chapter 13. Bankruptcy law allows Chapter 13 debtors to file a motion to dismiss at any time. However, even though the court must grant the dismissal of your case, the court may also restrict your ability to file another bankruptcy case in the future. Read the instructions of the judge signing your dismissal for information impairing your future filing ability.
Go to Court
Argue your reasoning to the judge. In a Chapter 7 case, you must convince the court that your cancellation does not harm your creditors. For example, if you suddenly inherit money that the court could use to distribute to your creditors in a Chapter 7 case, your dismissal would not be in your creditors' best interest. In such a case, the court may very well deny your petition for dismissal. You must present your position in a way that the court deems nonprejudicial to your creditors.
Prepare for Objections
Prepare to face trustee objections. Normally, the court will grant your dismissal unless someone objects. In a Chapter 7 case, the most likely objector is your case trustee, who may feel that your dismissal could work against your creditors. If an objection is filed, you must defend your case against the trustee during your hearing. You will get advance notice before your hearing if the trustee objects.
John Csiszar served as a financial adviser for over 18 years, both for a global wirehouse and at his own investment advisory firm, earning a Certified Financial Planner designation along the way. He now works as a writing and editing contractor for private clients, with thousands of online articles to his credit, along with five educational books written for young adults.