Should You Seek Dismissal of Your Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy provides debtors the option of paying off debts for 3-5 years without needing to give up any property in return. At the end of the payment plan, certain unpaid debts will finally be discharged, i.e., wiped out and no longer a nuisance.
However, you might realize at some point after filing that you no longer want to continue with your Chapter 13. Fortunately, Section 1307(b) of the Bankruptcy Code provides debtors with the right to have their bankruptcy dismissed. You will submit a written request to the judge, and the Code instructs him or her to dismiss the case promptly.
But is seeking a dismissal a debtor’s best option? Our Plantation bankruptcy attorney reviews some situations where dismissing a bankruptcy before completion makes sense.
You No Longer Need the Bankruptcy
Some people file for Chapter 13 protection because they have fallen behind on their mortgage or car loan. Because the automatic stay goes into effect, your lender cannot foreclose on the property, and you get to make up any late payments that you owe. For example, you might have filed to prevent foreclosure on your home, but you pay off your mortgage arrearages after a year.
In these situations, you might want to get out of the bankruptcy because it is no longer doing anything for you. However, you must think carefully. You will not get certain unsecured debts discharged until you complete the payment plan. So if you are hoping to also wipe out some credit card debt, you will need to see your plan to completion.
If you are using the bankruptcy to catch up on mortgage payments, then moving suddenly changes the calculation. In this situation, you might simply sell the house and pay off your mortgage before pulling out of your bankruptcy. There is no reason to stick to a rigorous payment plan if you no longer need to.
You Come into Some Money
You might receive an inheritance, which will allow you to suddenly pay off your debts. In this example, it makes sense to seek a dismissal. A payment plan is burdensome, and there is no reason to worry about it if your financial situation improves dramatically.
Of course, remember that your creditors will still expect you to pay your debts, and they can take legal action if you don’t. You don’t want to end right back in bankruptcy court trying to avoid a wage garnishment or foreclosure.
Discuss Your Legal Options with Us
Dismissing a Chapter 13 bankruptcy is not your only option. For example, you might convert your bankruptcy to a straight Chapter 7. This is the easier of the two major consumer bankruptcies, and you can eliminate debts in a matter of months.
Before deciding what to do, please contact the Plantation bankruptcy attorneys at Nowack & Olson, PLLC today. We can review your options in a free consultation to ensure you choose the right plan to tackle your debt. Call us today to speak with a member of our firm.