Chapter 13 Bankruptcy is generally used by people who have a reliable source of income, but who have become bogged down by debt. It allows them to keep most of their assets (and retain much off their credit), in return for following through with a debt installment plan for non-exempt debts over the course of 3-5 years.
In Maryland, some Chapter 13 bankruptcy cases are dismissed involuntarily. This can happen for a number of reasons, including:
- Not Completing Mandatory Education Courses
- Not Paying Court Filing Fees
- Not Appropriately Filing Required Forms and Documents
- Not Attending Your Meeting of Creditors
- Failing to Make Chapter 13 Plan Payments
Dismissal of a Chapter 13 Bankruptcy case before “discharge” (completion of the repayment plan) results in a loss of protections. Usually, it means that you lose the stay of collections actions, and are once again liable for your debts. If this happens involuntarily, it can be a huge and potentially devastating financial setback.
However, here are some situations in which it is actually beneficial to try to get your Chapter 13 Bankruptcy case dismissed. In these cases, the debtor usually wants to move for dismissal so they can file another bankruptcy case with better terms.
One example is if your Chapter 13 repayment installments are too high. When you initially file for Chapter 13, it can be hard to predict what your payments will be, as that is usually ironed out in process between the debtor, the trustee(s), and property/asset valuators, as well as the court. Sometimes, payments wind up being higher than expected, and debtors have a better chance at more favorable and manageable terms if they move for dismissal and re-file.
Another common use of Chapter 13 voluntary dismissal is to prevent a foreclosure. Sometimes, debtors fall behind on mortgage payments during the Chapter 13 process. This allows mortgage creditors to petition to lift the collections stay so they can pursue foreclosure. In these situations, lenders usually make agreements with debtors to keep the stay if the debtors agree to repay what they fell back on and keep current with payments moving forward. If debtors don’t hold to the agreement, the stay is lifted, and debtors become vulnerable to foreclosure. In this case, the best option is often to voluntarily dismiss the original Chapter 13 case and file for a new one, which generally prevents foreclosure.
As is true for the entirety of the Chapter 13 bankruptcy process (and any bankruptcy process), it is imperative to consult with a qualified Maryland bankruptcy and debt restructuring attorney. The laws surrounding bankruptcy are incredibly complex, and it is perilously easy to make very serious mistakes if you aren’t a professional in the field. Bankruptcy can be difficult to begin with, and a professional guide through the process can be absolutely invaluable. If you want to give yourself the best possible chance at a fresh financial start, hire an attorney.
If you’re in the Bethesda, MD and greater Montgomery County area, Attorney Jillian Kindlund is ready to help. Attorney Kindlund has the experience, skill, knowledge, and resources to guide clients through even the most complex bankruptcy cases. She firmly believes that everyone deserves a path to financial freedom, and dedicates her practice to helping clients find that path. If you’re considering Chapter 13 Bankruptcy or debt restructuring in Bethesda, MD, don’t wait. Call (240) 539-9393 for a free consultation today.