A question we sometimes receive after a bankruptcy is filed is what steps should I take if I no longer want to be in a bankruptcy and want to take a dismissal? As with most aspects of bankruptcy, the answer depends on your particular case. To best answer the question we are going to try to break it down into a few important questions.

Technically, you can request a dismissal in either a Chapter 7 or Chapter 13 bankruptcy. However, it is typically more difficult to get out of a Chapter 7 bankruptcy. As we’ve explained in other blog posts, a Chapter 7 bankruptcy is like a runaway train. Once it gets going it is difficult to stop it. If you want to get out of a Chapter 7 bankruptcy because you have more non-exempt equity that you anticipated you will likely have problems. It’s rare that someone would want to get out of or dismiss a Chapter 7 bankruptcy. As explained in our Chapter 7 bankruptcy timeline, a Chapter 7 bankruptcy is fairly quick. It typically lasts for about four to six months.

On the other hand, there are times where it would make sense to get out of a Chapter 13 bankruptcy. You always will have the right to voluntarily request a dismissal in a Chapter 13 bankruptcy. Those voluntary dismissal requests are almost always approved by the bankruptcy judge and your case would then be dismissed.

The important question to ask is should you take a dismissal from your bankruptcy.

We have done enough bankruptcies through the years to understand that life happens, your circumstances change and what made sense at one time may not make sense any longer. If you do qualify to request a dismissal, should you?

As always, you should discuss this decision in detail with your bankruptcy attorney because making an important decision like requesting a dismissal from your bankruptcy could be costly if done for the wrong reason(s).

In our experience, it rarely makes sense to request a voluntary dismissal in a Chapter 13 bankruptcy. Instead, you may want to request your monthly payments to be reduced (if possible).

However, it may make sense to take a dismissal from your bankruptcy if your Chapter 13 plan payments have risen to the level where you can no longer afford them. Your payment in a Chapter 13 bankruptcy could go up if, while in your bankruptcy, you fall behind on your mortgage or car payment and in order to keep those items your payment must go up (to account for the new arrearage amount) to ensure the debts are paid off or brought current before the end of your bankruptcy.

Another example of when your overall household expenses or Chapter 13 payment could increase in a Chapter 13 is if you incur a significant tax liability while in a Chapter 13. That tax debt may not be able to be included in your bankruptcy and you, therefore, must pay the taxes in addition to your Chapter 13 plan payment. If it was taxes that were owed prior to the bankruptcy being filed and you subsequently owe more than what you thought (you were audited) then your Chapter 13 payment would need to go up to pay back that tax liability.

So you’ve determined you can take a dismissal and after consulting with your bankruptcy attorney you have decided you should take a dismissal. How do you make it happen?

The process is actually pretty simple. In order to request a dismissal in a Chapter 13 bankruptcy, you need to submit a notice, in writing, to your Chapter 13 Trustee. It must include your name, case number and be signed by you and your spouse (if you filed a joint case). The letter then needs to be hand-delivered or mailed to the Trustee’s office. You don’t need to go into any specifics on why you are requesting a dismissal. In fact, I typically wouldn’t waste your time explaining the details since you have the right to request the dismissal. Again, just be sure your bankruptcy attorney is aware of this request before you send it off.

The Trustee’s office will then file a Motion to Dismiss stating you’ve requested to be dismissed from the bankruptcy. At that time the bankruptcy Trustee will stop deducting payments from your paychecks. Within a few weeks, the case will be dismissed and you will no longer be in a bankruptcy.

It is important to remember, if you request to be dismissed, none of your debts will be discharged. The money you have paid will have been applied to your debts but the whole debt will not have been paid and will still be owed. Additionally, you will be responsible for any late fees and penalties that had accrued while you were in the bankruptcy. You also lose the protection of the automatic stay to creditors provided by the bankruptcy. Finally, any secured debts (house, cars, furniture, etc.) that were being paid will need to be current when you take your dismissal or you could lose that property after you take the dismissal. Taking a dismissal is a decision that ends your bankruptcy and all of the benefits and protections that are afforded to those within a bankruptcy.