Can I Change my Mind and Cancel my Case After I File?

Facing debt emergencies can be stressful for anyone and we often see clients who want to file bankruptcy immediately to stop a pending repossession or wage garnishment.  While Ginsberg Law Offices is always available to deal with these emergencies, we encourage our clients to think carefully about both the short term and long term effects of a Chapter bankruptcy filing.  We have created this web site for you to use as a learning resource so that you can educate yourself as much as possible about the bankruptcy process.

Sometimes, however, we do get calls from new clients who decide shortly after filing that they do not want to be in Chapter 13 after all.  “Can you please cancel my filing,” is the common request.

In fact, Chapter 13 cases cannot be “canceled.”  In most instances we can voluntarily dismiss your Chapter 13 but your case number and the record of your filing will remain on your credit report.

We also urge our clients to be very careful about dismissing a Chapter 13.  Firstly, all of the debt issues that prompted the Chapter 13 filing in the beginning will still be there.  The immediate emergency may be over but it will come back.  Under the current bankruptcy law, re-filing a Chapter 13 can be much more difficult, costly and time consuming.

Second, there is a hidden risk associated with voluntarily dismissing your case.  Under Section 109 of the Bankruptcy Code, a debtor who voluntarily dismisses his case after a Motion for Relief has been filed in that case is not eligible to re-file for 180 days.  At the very least, therefore, if you decide to voluntarily dismiss your case, you should process that dismissal through our office and not try to do it on your own.

Finally, we advise our clients that even if you dismiss and are eligible to re-file, the trustees and creditors will subject your second case to a great deal more scrutiny than your first.  Bottom line: your decision to file bankruptcy in the first place should be well thought out, and any decision to dismiss your case should be even more thoroughly considered.

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.  Sometimes judges will allow you to dismiss your case and sometimes they will not.  You can be sure that the judge and the Chapter 7 trustee will want to know why you are requesting a voluntary dismissal.

If you are attempting to dismiss your Chapter 7 because you now realize that a “free and clear” asset is at risk, you can expect the trustee to oppose your dismissal request.  Remember that Chapter 7 serves to liquidate assets in exchange for a termination of your debt.  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 mother 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.  This is why we strongly recommend that no one try to file a Chapter 7 on his own or without competent legal advice.

By the way,  there are solutions to some of these problems, such as converting from Chapter 7 to Chapter 13 or compromising a claim with the Chapter 7 trustee, but, here, too, 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, call or email our office to discuss your concerns.