While they should credit whatever you paid, often the accrued interest and fees will be quite high. You need to seek the counsel of an experienced bankruptcy attorney to help you. Because your case was dismissed, the automatic stay ended, and creditors may now call you to collect on your debts.
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The short answer is, "yes, it is legal." You will find that the payments made by the Chapter 13 Trustee were probably applied to accrued interest, as your contracts with the creditors probably allow. I assume your attorney considered whether modifying your plan was feasible or whether it might have made sense to convert your case to chapter 7 or apply for a hardship discharge. If you didn't have an attorney, realize that not taking effective action when your wife was laid off is one of the consequences of trying to pinch pennies by not hiring one.
Trustee was paying according to the chapter 13 plan, which usually decreases or omits interest and penalties. So when you fall out of the plan, you DO get credit for the money paid to the creditors, but they get to go back to the old terms. In almost every case, a client who falls out after 2.5 years will end up owing money to the creditors. BEWARE OF YOUR CAR CREDITOR - THEY SOMETIMES TOW FIRST AND ASK QUESTIONS LATER. Do not leave anything valuable in there, just in case.
You might want to explore re-filing or filing as a chapter 7. Lots of good attorneys out there can help. Find an honest one. I hope this helps,
My short answer is "probably yes."
In many Chapter 13s most of your payments are applied to interest first, and oftimes some claims are not listed to be paid in full. Sometimes your balance may have grown due to more interest.
When your wife lost her job I assume you discussed options with your lawyer. In some cases you could have modified your plan, or converted to a 7 and discharged debts instead of a dismissal. (If you pinched pennies and made the mistake of filing pro se, you made a very costly mistake).
See a lawyer now to determine if you can do another 13, or a 7, or have other options.