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Grounds for Dismissal of a Bankruptcy Case

Categories: Automatic Stay, Bankruptcy Law Overview, Chapter 13, Chapter 7

I’m continuing my studies toward legal specialization in bankruptcy and want to share with you the general grounds for dismissal of a bankruptcy case. There are several ways your bankruptcy case can be dismissed. Once a bankruptcy case is dismissed, the case is terminated and the creditor’s collection rights at state law are no longer stayed.  This means your home can be foreclosed upon, wage garnishments or bank levies can continue, etc.

(1) Voluntary Dismissal by the petitioner:  A debtor who has fled a voluntary case may withdraw the petition by requesting dismissal.  I hear of bankruptcy hijacking cases here in the Central District where cases were filed without the petitioner’s knowledge or consent, and cases that were filed, not for the good faith purpose of completing bankruptcy, but rather to simply stop a foreclosure.  There are so many problems that loom when bankruptcy is misused, not to mention that your credit report will now show the public record of this bankruptcy case.

(2) Dismissal for cause by a party other than the petitioner: A dismissal for cause is available under all chapters of the Code and each chapter holds a nonexclusive list of the reasons available. 

(3) Dismissal by the court on grounds of lack of cooperation, abuse of process or bad faith:  Earlier this year, Nadya Suleman aka “Octomom’s” bankruptcy case was dismissed because she had failed to file the remainder of her bankruptcy schedules as required under 11 U.S.C. 521. Failing to comply with the court’s requirements and filing a complete petition, will be grounds for dismissal. Also important is that you take a prefiling credit counseling course before your case is filed, as this too, is grounds for dismissal. Your case could be dismissed for abuse of the bankruptcy process. Perhaps you make too much money to file under Chapter 7.  The court will evaluated many factors, including whether the case should be brought under another chapter and will look at all the circumstances of the case in deciding whether a debtor has filed in bad faith.

For additional information about this and other bankruptcy subjects, please see, Bankruptcy and Debtor/Creditor, Fifth Edition by Brian A. Blum. Be very selective when choosing a professional to work with you during this important process.  Don’t get kicked by the court while you’re down and work with an attorney who’s focus is on bankruptcy law and who will work with you to achieve your financial goals.