Can You Dismiss Your Bankruptcy Case?

In almost every kind of civil case, if you file a lawsuit, you can change your mind, and dismiss the case at any point, often with little or no consequences. After all, you voluntarily choose to start the case, so you certainly have the option of ending it prematurely, if that’s what you want to do.

Dismissal of a Bankruptcy

But the dismissal rule isn’t so simple when it comes to bankruptcy. This is because the court takes into account your creditors when determining whether you can dismiss your case, and because if anybody was allowed to dismiss a bankruptcy case at any time, the bankruptcy system would almost certainly be abused.

Examples of Abuse

Let’s look at a hypothetical example. You file a bankruptcy. You believe that some expensive work machinery you have is totally exempt, under federal law. The problem is that you or your bankruptcy attorney made a mistake and didn’t remember that Florida uses its own bankruptcy exemptions, which do not exempt work tools or machinery the way that federal exemption laws do.

Now that machinery can be taken by a creditor. If you could just dismiss the bankruptcy, you could effectively yank that asset away from creditors, do whatever you wanted to the property, and then later after some time has gone by, file for bankruptcy again.

What about someone who accidentally fails to disclose an asset? If you forget to disclose that you own shares or stocks, and the trustee discovers it, you can’t just dismiss the case, thus depriving everybody of this asset that they discovered that you had.

A bankruptcy debtor could literally file bankruptcy over and over, and just dismiss the case whenever they had assets that could be taken. The bankruptcy laws don’t allow this.

Conversion

The thing that you could do in any of the situations above, or similar situations, is convert your Chapter 7 bankruptcy case to Chapter 13, if possible. But if you can’t convert the case—say, you don’t make enough money to qualify for a Chapter 13 payment plan—you could lose whatever asset that was exposed in the case.

This is why before you file for Chapter 7 bankruptcy, you need to make sure that you and our bankruptcy attorney review all of your assets, and make sure that you both understand what you own, and how much of what you own is protected by exemptions.

Dismissing a Chapter 13

In contrast to Chapter 7, in Chapter 13 bankruptcy, you can dismiss your case at will. The exception is where your case started as a Chapter 7, then converted to a Chapter 13, and then you want to dismiss the case. But other than that, the Court can’t compel you to work for a payment plan, if you do not want to do so.

Call the West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller at 561-264-6850 for help doing your bankruptcy the right way, to avoid problems in your case.

Resources:

law.cornell.edu/rules/frbp/rule_1017

flsb.uscourts.gov/local-rule/dismissal-case