The Bankruptcy Code allows debtors in Chapter 13 cases to voluntarily dismiss their bankruptcy case at any time. The ability to dismiss a case can be useful in many different situations. For example, when plan payments are higher than anticipated when the case is filed, debtors may wish to have their case dismissed. It is sometimes difficult to predict what a plan payment will be at the time the case is filed. Creditor’s claims sometimes are higher than what is provided for in the original plan, trustees may object to deductions used by the debtor to determine disposable income, and disputes about the value of property may increase claim amounts or create nonexempt property. All of these factors can cause plan payments to increase and cause debtors to consider voluntarily dismissing their case.
Sometimes debtors wish to have their case dismissed so that a new Chapter 13 case can be filed, in order to stop a foreclosure. Debtors may fall behind on their post-petition mortgage payments during their case. When this happens, mortgage lenders can file a motion with the court requesting that the automatic stay be lifted so that they can pursue foreclosure. Usually lenders are willing to negotiate an agreement with debtors, allowing the automatic stay to remain in place if the debtor will agree to repay the post-petition mortgage delinquency, and continue making the regular monthly mortgage payments. If the debtor fails to fulfill the terms of the agreement, the automatic stay is lifted, and the home can be foreclosed.. In this situation, a debtor should consider voluntarily dismissing their Chapter 13 case, and immediately filing a new case. In the new case, the automatic stay will be in place, and will prevent the foreclosure of the debtor’s home.
Voluntary dismissal of an existing Chapter 13 bankruptcy case can have unexpected consequences for debtors. Before requesting a bankruptcy case be dismissed, debtors should consult with their attorney to discuss the ramifications of dismissal.