Thursday, June 14, 2012

The Facts About Bankruptcy Dismissal

Bankruptcy provides an opportunity for someone experiencing financial hardship relief from overwhelming debt. By filing for bankruptcy a debtor can petition to have their debts expunged through a Chapter 7 bankruptcy or develop a debt repayment plan that outlines more financially favorable terms in a Chapter 13 bankruptcy. Filing a bankruptcy petition serves to protect debtor from negative consequences associated with defaulted payments on debts. By the time you have defaulted on payments to creditors, your credit standing has been negatively impacted. Although filing for bankruptcy will be reported to credit agencies, it does afford an opportunity to begin repairing your credit as soon as you receive a discharge of your debt. However, not everyone filing for bankruptcy will receive a debt discharge, but instead may have their petition denied in a bankruptcy dismissal.

Voluntary Dismissals

If you filed for a Chapter 13 bankruptcy, you may voluntarily request a bankruptcy dismissal. Typically, a dismissal is only voluntarily requested if they courts notify the debtor that their debts are not dischargeable through bankruptcy. You may also request a dismissal if you secured enough income to repay your debts without the aid of bankruptcy. In a Chapter 7 bankruptcy, there is little freedom to request a dismissal. Once a bankruptcy petition is filed in a Chapter 7 bankruptcy, the court must approve a voluntary dismissal.

Involuntary Dismissals

Most often, someone receiving a bankruptcy dismissal is the decision of the bankruptcy court. The court will dismiss your bankruptcy case if you failed to follow the court order or pay the necessary fees. Bankruptcy laws require anyone filing for bankruptcy to complete a credit counseling course, failure to complete this course can lead to the dismissal of your case. Another reason your case may be dismissed if you have not filed a tax return over the four years preceding your bankruptcy petition. Also, your bankruptcy case is likely to be dismissed if you fail to make the necessary payments outlined in your Chapter 13 plan without requesting a voluntary dismissal.

Consequences of a Bankruptcy Dismissal

Dismissal can lead to negative consequences for the debtor, resulting in more problems than prior to filing for bankruptcy. Once a case is dismissed, you will no longer be protected from collection efforts by creditors. You will be responsible for managing their debt payments to creditors without assistance from bankruptcy provisions. Dismissal from bankruptcy also means you are no longer protected from further damage to your credit standing. The Fair Credit Reporting Act regulates credit reporting practices and allows a bankruptcy filing to remain on your credit report for up to 10 years. There is no guarantee the bankruptcy filing will remain on your report for that duration. You should be aware that even if you do not complete the bankruptcy proceeding, by receiving a dismissal, your credit report will reflect a bankruptcy. Receiving a bankruptcy dismissal can also lead to complications with future bankruptcy filings. Any disregard for court orders will prohibit you from filing for at least 180 days. However, you may be able to reinstate your bankruptcy if you received an involuntary dismissal due to failure to meet paperwork or fee requirements. Dismissals also affect your protection from creditors through an automatic stay, which prevents creditors from making collection attempts. If your bankruptcy case was dismissed within the last year, you are allowed only 30 days of protection from creditors with an automatic stay.

To protect your bankruptcy petition from being dismissed, contact a qualified bankruptcy attorney to assist you through the process. Your attorney will make sure you qualify for bankruptcy, help you complete and file all the necessary paperwork and even make payments on your behalf. It is important you are up front and truthful about your financial hardship and any assets you own. Hiding important information can lead to bankruptcy fraud, which carries serious legal consequences.

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