What is chapter 13 bankruptcy?
One’s debt has to be below 3, 94,725$ in unsecured loans (credit card, personal loans) and lesser than 1,184,200$ in secured loans for successful enlistment in chapter 13.
Secured loans are the ones backed by mortgages, or collateral like a house, car, etc.
Secured debts cannot be discharged in chapter 7. It is better suited for un-secured loans leaving the heavy duty secured loans for chapter 13.
Some debts are non-dischargeable in chapter 7. Debts arising from unpaid marital alimony, child support, and IRS arrears are non-dischargeable. This has been done because it’s assumed that these debts have been accumulated intentionally and not in good faith. However, these debts are dischargeable in chapter 13.
Once chapter 13 ends successfully with discharge, your remaining non-secured debts (except student loans) are forgiven.
Chapter 13 gives the debtor a time frame of 3-5 years to repay the agreed amount of discounted loans in installments.
In chapter 13, the installment payment each month is paid from your disposable income.
Disposable income = Income – your normal expenses. The expenses here are calculated in a predefined, standard format. Because you are applying for bankruptcy discharge, you will be allowed expenses which will allow a frugal lifestyle only. Income above that will be disposable income. It will be handed over to the trustee board for a monthly payment to lenders as per bankruptcy court approved restructuring plan.
If the defendant misses a payment, the court may dismiss 13 and redirect to file for chapter 7.
Chapter 13 Dismissed top causes
“Chapter 13 dismissed”-This pronouncement brings down the roof on the debtor. It can be dismissed because the trustee board or bankruptcy court might not find the repayment plan feasible.
Even after the bankruptcy plan has started, if you start defaulting in payments, either the trustee board or the lenders can file a motion to dismiss running chapter 13.
Chapter 13 plan payments get approved and payment cycle begins. Many times it happens that the revenue on which the disposable income was based, does not fructify. So, you become unable to pay the installments. That will be the end of your chapter 13 unless you reach a new agreement quickly with your lenders and apply for reinstatement.
If you fail to make regular repayments, you will find your chapter 13 dismissed for non-payment. If you sense trouble in repayment via chapter 13 – act quickly. Place a modified approved plan for the trustee board. But going by their previous experience with you, they might not find your plan sustainable and voluntarily dismiss it. Then the modified plan would not help, and your 13th bankruptcy chapter petition shall be dismissed.
The judge will dismiss your case if he finds that you have lied under oath. He will also reject your case if he finds that you have concealed your assets or property while you took advantage of bankruptcy.
If the judge finds that you have transferred property within one year of the filing of 13, get ready for dismissal.
Also after filling the repayment restructure, if you do not attend the creditors and trustee board meeting, your plan will not get approved in the first place.
How do chapter 13 bankruptcy dismissals affect you?
There are two obvious visible effects of chapter 13 dismissal.
- Your credit rating goes down by 100-150 points. It’s downgraded more when your credit ranking is higher.
- Ability to get a loan or mortgage decreases drastically. This will continue for 7 years since the dismissal date.
- If you are filling for afresh for chapter 13 after dismissal, you have to re-do the credit counseling course, and that involves fees.
- The second time you file for chapter 13, you get the automatic stay for a finite time. If you are filling for the 3rd time after dismissal, you get no automatic stay at all. The debtor’s legal shield is withdrawn automatically.
How can you apply for bankruptcy reinstatement?
My chapter 13 dismissed – Can I refile for bankruptcy relief under chapter 13?
In other bankruptcy cases, there is an abstinence period of 180 days before an appeal can be filed anew. However, in chapter 13 there is no mandatory separation time. The new petition can be filed as soon as the listing one is dismissed.
Here is an advice. It’s better to file review for remedial reinstatement of the case rather than its dismissal.
However, your reinstatement appeal will only find takers in court if you have suddenly found a new capability for regular repayment.
Reinstatement saves you from the harassment of filing afresh. When you refile a second time (within one year for chapter 13), you get an automatic stay for only one month. For a longer stay, you will have to petition the judge.
- What does it mean to have chapter 13 dismissed?
The implications are grave.
- Dismissal of chapter 13 nullifies your automatic stay. Creditors will again start baying for your blood. They will file lawsuits anew, against you, for the right to confiscate your property and auction them.
- You may have no other option but to file for chapter 7. That means an end to all your business and properties except the basic non-exempt ones.
- Otherwise, it can also mean chapter 13 refilling. And that’s not easy. It means fresh credit counseling, meeting with debtor’s to re-plan and approve debt repayment plan and placing it before the trustee board.
- How long after chapter 13 dismissal can you refile?
In the case of chapter 13 discharge, you will have to wait for two years before you can file for fresh filing for chapter 13.
However, if your chapter 13 is dismissed, you can refile immediately. You can file twice or thrice. However, when you refile the second time within one year, you will get an automatic stay of only one month.
If you refile the third time, you will get no automatic stay.
- How many times can you refile for chapter 13?
You can file twice or even thrice after the dismissal. There is no mandatory separation period after the first dismissal.
- What is hardship discharge in chapter 13?
Well, this can be used tactfully or honestly. If you are not able to handle the chapter 13 payment but do not want to be dismissed as well, you can try “Hardship Dismissal”.
For “Hardship discharge” you creditors should receive the full amount that they would receive under chapter 7.
One crucial point is that there should be a drastic downgrade in your income, which leaves you incapable to fulfill disposable repayment needed per month. The moot point is that this situation should arise purely out of involuntary reasons beyond your control. But your behavior before this unfortunate incident should demonstrate your commitment to fulfill chapter 13 approved plan.
There should be no chances of future upgradation in your income.
In this situation, you can pray for “Hardship Discharge,” which allows you a discharge of chapter 13 much before the 3-5 years mandatory period.
- Can creditors take action against me after bankruptcy dismissal?
Absolutely yes and trust me it’s excruciating. Because chapter 13 dismissed means lifting of Automatic stay granted against creditors action. Creditors can sue you for the whole debt and file appeal to take over your assets. Foreclosures, Wage garnishments, and car repossession may follow.
In short, with the dismissal, the whole route for debt collection by legal action opens up.
David Galler is an experienced bankruptcy attorney based in Atlanta, Georgia. For the last 29 years he has filed over 10,000 bankruptcy cases. He has a FIVE STAR client rating on Avvo, Kudzu.com, RateABiz.com, and Google+, among other sites. Over 99% of all Chapter 7 cases he filed have been discharged.