A trustee motion to dismiss a Chapter 13 bankruptcy indicates problems with adhering to the court rules or your repayment plan, like missed payments or missing documents. This article will explain the reasons behind such motions, how to respond promptly, and ways to prevent it from happening. Learn what actions you need to take to keep your bankruptcy protections.
Key Takeaways
- A trustee’s motion to dismiss is typically due to missed payments or failure to comply with court orders, necessitating a timely response to prevent dismissal of the Chapter 13 case.
- Prompt communication with the trustee can lead to options for catching up on missed payments or modifying the Chapter 13 plan, ensuring continued compliance and protection from creditors.
- Consultation with an experienced bankruptcy attorney is crucial for navigating the complexities of a motion to dismiss, as legal assistance can enhance the chances of a favorable outcome in bankruptcy proceedings.
How to Handle a Trustee Motion to Dismiss Chapter 13 Bankruptcy
A trustee’s motion to dismiss is normally over the failure to make plan payments. However, it can be cured with a lump sum payment or periodic payments to catch it up. A bankruptcy trustee may file a motion to dismiss if you miss payments, fail to follow court orders, or neglect necessary documents. Non-compliance with the plan indicated by this motion requires a prompt objection to avoid dismissal. To cure the objection you can also
- modify the plan instead of completing the original plan,
- convert and seek a bankruptcy discharge under Chapter 7 or
- seek an early hardship discharge
The motion to dismiss can also be for violation of a local rule. In the Western District of Kentucky this is often the failure to file the required annual budget and turn over a tax refund. Ignoring the bankruptcy trustee for the Western District’s motion means the court grants this motion and your case gets dismissed and your foreclosure or wage garnishment restarts. You may be unable to refile another Chapter 13 to stop a foreclosure, car repossesion or garnishment. Upon receiving a motion to dismiss, you must file a timely response and request a hearing to show valid reasons for nonpayment and a plan to cure the default. This may mean a probationary or strict compliance order with the trustee, allowing you to remain in the Chapter 13 case. But miss future payments and the case is automatically dismissed.
Debtors can address arrears by proposing additional payments or negotiating a lower monthly payment. After a dismissal, you may refile a Chapter 13 case if you can demonstrate the feasibility of a new repayment plan.
Introduction
Chapter 13 bankruptcy allows individuals with regular income to develop a plan in good faith to repay debts over time. The trustee ensures the debtor adheres to the repayment plan’s requirements. There are minimum mandatory payments for administrative expenses, secured and priority debts which must be paid. Violation of making payments will often have a 20 day response time but violation of a local rule or probation order may have no warning for the debtor. Reinstatement of the case may require a lump sum payment.
Prepare a response by reviewing the motion and gathering relevant financial documentation to prove a hardship. However hardship or showing the financial circumstances have changed will not cure or excuse the failure to make payments or a violation of a local rule. The debtor often has to cure the default or the case is dismissed. And the dismissal of a Chapter 13 case means losing the bankruptcy courts automatic stay protections from creditors. Sometimes you can immediately file a new case. But often if you have failed to make timely monthly mortgage payment and the home or auto lender has gotten relief from the stay. Filing a new case may not be possible.
Post-dismissal, debtors normally face difficulties with future filings and filing a multiple cases has severe credit impacts. It’s almost impossible to know all of the rules and bankruptcy proceedings. A bankruptcy lawyer can guide you in responding to motions and mitigate dismissal risks. Legal assistance can help ensure compliance with the Chapter 13 plan and prevent future dismissal motions.
Understanding the Trustee’s Motion to Dismiss
A trustee’s motion to dismiss indicates non-compliance with the repayment plan terms. Missed payments, failure to submit tax returns, failure to records for bank accounts, and not attending required meetings are common reasons for a trustee’s motion to dismiss. Approval of a trustee’s motion to dismiss by the court results in the immediate loss of bankruptcy protection and resumed creditor collection efforts.
Responses to a motion to dismiss can include seeking a hardship discharge if the debtor:
- did not cause how financial circumstances have changed,
- has substantially completed the plan
- and the plan has already paid what a Chapter 7 would have paid
Debtors unable to meet Chapter 13 obligations can request a conversion to Chapter 7 even if they have not substantially completed payment. However if the assets are not exempt a Chapter 7 trustee may sell assets. Debtors can counter a motion to dismiss by explaining their plans to fix the issues and demonstrating their ability to make future payments.
Responding Promptly to the Motion to Dismiss
Responding timely to a motion to dismiss is crucial to maintain the bankruptcy case and avoid dismissal. Prompt action allows exploring options to save the repayment plan. Ignoring a motion to dismiss will result in the court granting the motion without a hearing or further notice. Not opposing the trustee’s motion to dismiss leads to the court dismissing a bankruptcy without discharging debts.
The usual time frame to respond to a trustee’s motion to dismiss is 21 days. Consulting a bankruptcy attorney immediately after receiving the motion is advisable.
Your response should explain if the trustee’s motion to dismiss is incorrect, supported by evidence. Provide documented reasons and evidence if arguing that the trustee’s dismissal motion is unjustified. Responding to the trustee’s motion allows you to explain why the case should continue.
Common Reasons for a Trustee’s Motion to Dismiss
A motion to dismiss in Chapter 13 bankruptcy usually arises from missed payments or failure to provide necessary documentation. Changing jobs or missing work due to injury or illness are common reasons for being behind on Chapter 13 payments.
But never forget that every court rule is a strict compliance order. You dont have to just make timely monthly payments. If you have a unexpected expenses, medical emergency, job loss, incur significant medical debt completing the original plan my become impossible.
When the plan becomes impossible look at modifying the plan so you can obtain a bankruptcy discharge. Sometimes, a debtor will have to voluntarily dismiss Chapter 13. But the rules to voluntarily dismiss your chapter 13 are strict and a voluntary dismissal has to be planned to avoid the penalties of 11 USC 109(g).
Options for Addressing Missed Payments
Missed payments in Chapter 13 bankruptcy can lead to a trustee’s motion to dismiss, requiring prompt action from the debtor. Debtors can address missed payments by catching up on them or modifying their repayment plan.
Catching Up on Payments
If you miss payments, communicate with the trustee as they may allow a catch-up plan to avoid dismissal. Opening a dialogue with the trustee can provide flexible options for catching up on missed payments. This may involve making additional payments or explaining why the payments were missed.
If valid reasons for the default are shown, additional time to catch up on payments may be granted by the court.
Modifying Your Repayment Plan
Debtors can renegotiate their repayment plans if significant changes occur, such as incurring new debts. If you can’t afford your Chapter 13 payment due to changes, contact your attorney to modify your repayment plan.
Inform your attorney of any changes affecting your Chapter 13 payments to modify your plan payment accordingly. Work out a modified repayment plan with the trustee to address missed payments.
Provide documentation and proof of your changed circumstances to modify your Chapter 13 repayment plan. The debtor must demonstrate that modifying the repayment plan is not feasible due to financial constraints.
Requesting a Hardship Discharge
A hardship discharge is available for debtors facing uncontrollable circumstances preventing them from completing their repayment plan. Debtors can seek a hardship discharge if uncontrollable circumstances hinder following the original repayment plan and specific criteria are met. Debtors must prove that unsecured creditors have received at least as much as they would have in a Chapter 7 case. To obtain a hardship discharge, debtors must show that their inability to complete payments is due to uncontrollable circumstances.
The debtor’s attorney must file a motion to request a hardship discharge. Proof must also be provided to the court. Hardship discharges are rare and not commonly granted in Chapter 13 cases. If a hardship discharge cannot be obtained, re-filing may be the only remaining option.
A debtor can apply for a hardship discharge only if the hardship circumstances are beyond their control.
Converting to Chapter 7 Bankruptcy
Debtors must pass a means test evaluating income and expenses to convert to Chapter 7 bankruptcy. To convert Chapter 13 to Chapter 7, debtors can file a notice of conversion, new schedules, pass the means test, and pay a small fee, usually around $25 plus attorney costs.
Converting to Chapter 7 bankruptcy discharges most unsecured debts but requires surrendering non-exempt assets to a trustee, which may be sold to pay creditors.
Preparing for a Motion to Dismiss Hearing
Debtors must gather all necessary documentation related to their financial circumstances and repayment proposal before the hearing. Debtors should prepare to present how their repayment plan meets court approval standards, demonstrating the debtor’s ability to fulfill the terms.
An attorney can help challenge a trustee’s motion to dismiss by presenting a strong defense.
Consequences of Chapter 13 Dismissal
Approval of a trustee’s motion to dismiss by the bankruptcy court results in loss of bankruptcy protection and resumed creditor collection efforts. Dismissal of a Chapter 13 bankruptcy lifts the automatic stay that protects debtors from creditor actions. Failure to adhere to repayment terms may result in loss of bankruptcy protections and resumed creditor collection efforts. Dismissal of a Chapter 13 case allows creditors to take various collection actions, including lawsuits and repossessions.
Case dismissal typically reverses any debt modifications made during the bankruptcy process. Debtors may owe the full amount of their pre-bankruptcy debts if their Chapter 13 case is dismissed before completing the repayment plan. A Chapter 13 dismissal can leave debtors in a worse financial state than before filing for bankruptcy.
If dismissed with prejudice, you cannot file until the period specified in the dismissal order ends. A dismissal with prejudice restricts the debtor from filing another bankruptcy for a specified duration.
Refiling After Dismissal
After a motion to dismiss is granted, a debtor can refile for Chapter 13 or consider converting to Chapter 7 if they qualify. If a case was dismissed for failure to appear or violation of court rules, a 180-day waiting period applies prior to refiling. You may not have time to avoid a forclosure sale if your Chapter 13 case was dismissed voluntarily after a Motion for Relief was filed. You must wait 180 days before refiling. Otherwise, you can refile for Chapter 13 immediately.
If you had a bankruptcy case in the last 365 days, the automatic stay may only last for 30 days upon refiling unless extended by the court. Debtors may file for Chapter 13 multiple times; there is no specific limit on how many times one can refile. But at some point, the court will bar you for abuse. Debtors must explain why the new case will succeed compared to the previous dismissal when refiling. Debtors may need to take a new credit counseling course if it has been more than 180 days since their last course.
The Role of an Experienced Bankruptcy Attorney
It is important for debtors to consult with their attorney upon receiving a motion to dismiss to explore options for resolving the situation. Though not mandatory, a bankruptcy attorney’s expertise is invaluable when responding to complex legal motions. Consulting a skilled attorney increases the likelihood of a favorable outcome in a Chapter 13 case, and many offer a free consultation.
Experienced lawyers understand the nuances of bankruptcy law, which can streamline the process for their clients. Hiring a reputable attorney ensures that the debtor receives competent representation throughout the bankruptcy process.
Maintaining open communication with the trustee can facilitate quicker resolutions to any potential problems.
Preventing Future Issues
Debtors must adhere to the terms of their repayment plan in Chapter 13 bankruptcy to avoid the risk of dismissal by the trustee. Prioritize timely plan payments and current mandatory payments to avoid dismissal. Debtors need to report any changes in their financial situation quickly. This should be communicated to both their bankruptcy attorney and trustee.
Regularly reviewing the repayment plan and making necessary adjustments can help prevent compliance issues. Debtors must keep precise records of all payments. They should also document any correspondence related to the bankruptcy case.
Summary
Navigating a trustee’s motion to dismiss Chapter 13 bankruptcy can be daunting, but understanding your options and acting promptly can make a significant difference. By catching up on missed payments, modifying your repayment plan, or even considering a hardship discharge or conversion to Chapter 7, you can address the motion and stay on track with your bankruptcy case. Consulting an experienced bankruptcy attorney can provide the necessary guidance and support to navigate these complexities.
Remember, staying proactive and informed is key to managing your bankruptcy case and preventing future issues. With the right approach and support, you can overcome this hurdle and continue your journey towards financial stability.
Trustee Motion to Dismiss Chapter 13 Bankruptcy Frequently Asked Questions
What should I do if I receive a trustee’s motion to dismiss?
If you receive a trustee’s motion to dismiss, it is essential to respond promptly by reviewing the motion, collecting pertinent financial documents, and consulting with an experienced bankruptcy attorney. Taking timely action will help prevent your case from being dismissed without a hearing.
What are common reasons for a trustee’s motion to dismiss a Chapter 13 bankruptcy?
A trustee’s motion to dismiss a Chapter 13 bankruptcy often arises due to missed payments, failure to submit required documents, and non-attendance at mandatory meetings. Additionally, significant changes in financial circumstances, such as job loss or medical emergencies, can exacerbate these issues.
How can I catch up on missed Chapter 13 payments?
To catch up on missed Chapter 13 payments, it is essential to communicate with the trustee to establish a catch-up plan, which may include making additional payments or providing valid reasons for the missed payments. The court may offer additional time to rectify the situation if justifiable reasons are presented.
What is a hardship discharge, and how can I request one?
A hardship discharge allows you to be excused from your repayment plan due to uncontrollable circumstances. To request one, your attorney must file a motion with the court, demonstrating your inability to complete payments due to factors beyond your control.
Can I refile for Chapter 13 bankruptcy if my case is dismissed?
You can refile for Chapter 13 bankruptcy if your case is dismissed, but be aware that a dismissal with prejudice may impose a 180-day waiting period before you can initiate the process again.
