July 23, 2018

What Happens if my Chapter 13 Case is Dismissed?

Earlier this week, I wrote a post entitled Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss.  In that post I spoke about the relatively common scenario whereby a Chapter 13 debtor will fall behind on payments to the trustee or an unexpected claim will cause the plan to run longer than 60 months.  In such a case, the trustee will file a motion to dismiss and the debtor and counsel will have an opportunity to propose a cure to the delinquency.  Usually this cure takes the form of a lump sum payment immediately with the remaining delinquency paid to the trustee over time.

What happens if the proposed cure is not feasible for the debtor?  In such a case, the judge would sustain the trustee’s motion to dismiss or the debtor would not oppose the motion.  Either way, the debtor’s Chapter 13 case will be dismissed.

When a Chapter 13 case is dismissed, creditors can immediately pursue all non-bankruptcy alternatives.  If there is a home and mortgage delinquency involved, the mortgage lender can start foreclosure proceedings.  If there is a car payment involved, the car lender can immediately start the repossession process.  Credit card lenders can restart collection efforts including calls and letters. [Read more…]

My Chapter 13 Was Dismissed Two Weeks Ago – Can I Refile a Chapter 13?

A visitor to one of my web sites wrote me to ask about refiling his Chapter 13.  After being in a Chapter 13 for almost 2 years, this gentlemen lost his job and fell behind with his Chapter 13 payments.  His mortgage company filed a Motion for Relief because he had falled behind on his mortgage payments (this motion was granted) and the trustee filed a motion to dismiss based on the delinquency in trustee payments.  This motion to dismiss was also granted and the case was dismissed.

Now, some 6 weeks later, the mortgage company has started foreclosure proceedings and my visitor wants to know if he can refile the Chapter 13 to stop the foreclosure.

Here are my thoughts:  under the BAPCPA changes to the bankruptcy law, a debtor can refile his Chapter 13 case.  However, if case #2 is filed within 12 months that case #1 was pending, then the automatic stay is not absolute.  Instead, the automatic stay does go into effect, but it terminates in 30 days unless the debtor files a motion with the court and convinces the judge to extend the stay.

Thus, my site visitor can refile his case, but he and his lawyer need to immediately file a Motion to Extend the Stay.  Some judges will extend the stay for pretty much any reason, while others will want to see a significant change in the debtor’s circumstances.

If the judge does not extend the stay, then it would come to an end in 30 days and the mortgage company would be free to re-start foreclosure proceedings.

Note that there are different rules for a 3rd case filed within any 12 months when prior cases were pending, or if the debtor had voluntarily dismissed his prior case – subjects for a different blog post.  In the meantime, my colleague Rachel Lynn Foley does tackle some of these issues in a helpful post published on the Bankruptcy Law Network blog.

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