Can I Change My Mind and Cancel My Bankruptcy Filing?

  “Am I allowed to change my mind and cancel my bankruptcy filing?”  Our office gets this question several times a month from clients who filed a bankruptcy case to stop an emergency but now are not so sure that bankruptcy is where they want to be.

Dismissing a Chapter 13 Case

  In a Chapter 13 filing, you generally do have the option to voluntarily dismiss your case.  However, if you dismiss your case, a record of your bankruptcy filing will still go onto your credit report.  In other words, once a bankruptcy case number is issued to you, it cannot be purged or deleted from your credit report, even if you stay in bankruptcy for only one day.

  There are other potential issues that can arise if you want to dismiss your Chapter 13 voluntarily:

• Section 109 of the Bankruptcy Code provides that if you voluntarily dismiss your case after a Motion for Relief From Stay has been filed in your case, you are not eligible to re-file another bankruptcy case for 180 days. This 180 prohibition only applies to voluntarily dismissals, not a dismissal arising from a trustee motion to dismiss.
   
• Second, third or additional multiple filings within the 12 months following dismissal will have different automatic stay rules apply.  This may mean less automatic protection against a foreclosure or repossession or wage garnishment.
   
• if you do change your mind again and end up back in bankruptcy, the trustee and judge will scrutinize your case much more strictly than in your first filing.  Bankruptcy judges are very concerned about “serial bankruptcy filings” - multiple cases filed by an individual or related individuals that are filed solely for the purpose of delay

  Before making any firm decisions about voluntarily dismissing your Chapter 13 case, Clark and Washington urges you to make an appointment with one of our lawyers to discuss all of the implications.

Dismissing a Chapter 7 Case

  Unlike Chapter 13, the Bankruptcy Code does not give you the right to voluntarily dismiss your Chapter 7 case.  If you want to dismiss a Chapter 7, you must file a motion requesting dismissal that will be heard by your bankruptcy judge.

  Remember that Chapter 7 functions as a liquidation.  The trustee’s job is to identify and gather your non-exempt equity and to sell that equity for the benefit of creditors.

  Problems can arise if your trustee identifies non-exempt property that you did not realize you owned.

• Example: your elderly other added you to the title of her $200,000 house
   
• Example: your name is on a joint bank account or life insurance policy
   
• Example: you filed a Chapter 7 without an attorney to stop a foreclosure, but your home has a lot of equity

  In these situations, the Chapter 7 trustee will proceed to liquidate your equity even if you do not want to stay in Chapter 7 or otherwise cooperate with the bankruptcy process.

  There are solutions to some of these problems, such as converting to Chapter 13 or compromising a claim with the Chapter 7 trustee, but you should not attempt to extricate yourself from Chapter 7 without the guidance of an experienced lawyer.

  As you can probably gather from the information contained on this page, getting out of bankruptcy can be a lot more difficult that getting into the process.  If you are not sure about whether bankruptcy is right for you, raise that issue with your Clark and Washington lawyer and seek his or her guidance prior to filing.