Bankruptcy dismissal is when something goes wrong and the court rejects your case. There are many reasons this can happen and many consequences. The word “dismiss” should never be confused with discharge, which is when certain debts are eliminated.
Instead, bankruptcy dismissal means that the case has been thrown out. The petition has failed. There is no longer a case. With almost all dismissals, the petitioner has wasted his or her time, although usually, one can try again soon, or after a waiting period.
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How Does Bankruptcy Dismissal Happen?
Filing for bankruptcy is a complicated process with many steps, forms, rules, and criteria for eligibility. The stresses of declaring bankruptcy can contribute to easy mistakes. One single mistake with any aspect of the process can be grounds for dismissal, so there is a lot of room for error.
Also, because bankruptcy provides a much-desired relief, some candidates attempt to misrepresent their situation. This is grounds for a type of dismissal that has more serious consequences than dismissals related to honest mistakes.
Specific Causes of Bankruptcy Dismissal Include:
- Failure to comply with court rules
- Procedural violations
- Failure to fulfill credit counseling or pass a means test
- Jurisdiction or residence issues
- Lack of timeliness in filing documents and forms
- Insufficient documentation
- Fraud against creditors, lenders, or courts
- Failure to make court appearances or attend creditors meetings
- Failure to pay filing fees or installment payments
- Prior cases, prior dismissals, and prior discharges
Effects and Consequences
When a bankruptcy petition is dismissed, all the time, money, and effort that went into the filing is lost, including the lawyer’s fees. Your debts are not discharged, or your payments are not restructured.
Filing for bankruptcy grants you an automatic stay against creditors, but when your case is dismissed, this is lifted and you’re back where you started. Important to note is that despite a dismissal, filing for bankruptcy can remain on your credit report and further hurt your credit scores.
After a dismissal, creditors and collection agencies can come after you again with all the power of the law, which could result in lawsuits, foreclosure, repossession of vehicles, wage garnishment, and nagging collections calls. In addition, depending on the circumstances of your dismissal, you may not be able to file again for half a year, or in the same court.
Types of Bankruptcy Dismissal
There are a number of types of dismissal, each with different consequences. Among them is dismissal with or without prejudice, voluntary dismissal, and dismissal for abuse. In many cases, as long the details of your petition were made honestly and in good faith, you can either reinstate a dismissed petition or file again right away.
Sometimes a voluntary dismissal is sought because one’s circumstances change. Usually, this means you are able to pay back your debts and no longer need bankruptcy relief.
However, a request for a voluntary dismissal isn’t always granted. Also, if your case was dismissed and you still wish to file, mistakes are not taken lightly. Anyone wishing to cheat the system could claim it was an accident; therefore, many mistakes will be cause for a dismissal that cannot be reinstated.
Dismissals with or without prejudice imply that cases were either dismissed for a good reason, such as fraud or because of unforeseen circumstances or honest mistakes. A dismissal for abuse or with prejudice means the case can never be filed again.
After a waiting period, however, usually half a year, a new case can be filed. Issues related to types of dismissals can be very different, so a great deal depends on your own particular circumstances.
Taking Action After a Dismissal
In cases of involuntarily dismissal or dismissal without prejudice, you can try to get your case reinstated if you move quickly and proactively. Often you’ll have a small window to continue pleading your case before it’s thrown out, so you have to pursue the issue immediately.
An honest mistake, or administrative dismissal, can sometimes be rectified by a “motion to reconsider” the case. This is your first step, combined with ascertaining and resolving the reason for the dismissal. A reinstatement is always an option, even if your mistake was an accident. There is also sometimes the option of filing an appeal.
If a dismissal is final, sometimes you can immediately file a new one. But any case of dismissal with prejudice, or for abuse, involves a waiting period, usually of 180 days. After that time you can file a new case, but your automatic stay might be limited to one month, making it more difficult to get approved.
Worth repeating a final time is the fact that a bankruptcy filing will be recorded on your credit report as soon as you file it, and it could remain on your credit report even if your case is dismissed. Filing a second time will drop your credit scores still further.