The Trustee Has Filed a Motion to Dismiss My Chapter 13 Case. What Are My Options?

If you are in a Chapter 13 plan and are unable to keep the payments current, the Trustee, or one of your creditors, may file a motion to dismiss the case. If this happens, you must move quickly to correct the situation.

In some districts, you must file a written response to the motion, or it will simply be granted without a hearing. In other districts, the motion is always set down for a hearing. If a response is required, make sure that your attorney files one promptly. If not, you may want to consider filing a response yourself.

It is often possible to save a plan that has fallen into arrears. You may be able to propose a cure of the delinquency by making additional payments, or through a lump sum payment from future income such as a tax refund. You may be able to negotiate a “Strict Compliance Order” that lets the plan continue as long as all future payments are made timely. Or, you may be able to modify the plan to provide for a lower payment. All of these possibilities should be discussed with your attorney, or in the alternative, with the Trustee’s attorney.

If it is not possible to save the plan, you may want to consider converting your case to a Chapter 7 bankruptcy rather than letting it be dismissed. This can sometimes be less expensive than having the case dismissed and then filing a new Chapter 7 case.

If the case is dismissed, you may be able to file a new Chapter 13 case, if you can show that the new plan is feasible. Of course, all payments under the new plan will have to be paid in a timely fashion, or you will soon be facing another dismissal. Repeated dismissals can result in an order that prevents you from filing for a period of time.

It is critical that you get qualified, experienced help when you consider filing, and when you are already in, a bankruptcy case. If your attorney is unresponsive, it may be time to seek new counsel, particularly if your case is dismissed and you need to refile.

Understanding the Trustee’s Motion to Dismiss

A trustee’s motion to dismiss a Chapter 13 case is a significant event in the bankruptcy process. It typically occurs when the bankruptcy trustee believes that the debtor has failed to comply with the terms of the repayment plan. Common reasons include missed payments, failure to provide proof of income, or falling behind on mandatory payments such as mortgage or car payments.

When the trustee files a motion to dismiss, it is essential to understand the implications. The bankruptcy court takes these motions seriously, and a dismissal can have serious consequences for the debtor. If the court dismisses the case, the debtor loses the protection of the automatic stay, which prevents creditors from collecting debts included in the bankruptcy.

Responding to a Motion to Dismiss

Upon receiving a trustee’s motion to dismiss, the debtor should immediately consult with their bankruptcy attorney. A written response may be required, and it is crucial to meet certain deadlines to avoid automatic dismissal. In some cases, the debtor can demonstrate a compelling reason for missed payments or other plan deviations, such as a change in financial circumstances or unexpected expenses.

A bankruptcy lawyer can help the debtor propose a plan to cure the delinquency. This may involve making additional payments, negotiating a lower monthly payment, or using a lump sum payment from future income, such as a tax refund, to catch up on missed payments. The goal is to show the court that the debtor is committed to completing the repayment plan.

 

Bankruptcy lawyer explaining the trustee's motion to dismiss Chapter 13 case in bankruptcy court.

Options if the Plan Cannot Be Saved

If saving the Chapter 13 plan is not feasible, there are other options. One possibility is converting the case to a Chapter 7 bankruptcy. This option may be suitable for debtors who can pass the means test, which determines eligibility for Chapter 7 based on income and expenses.

Converting to Chapter 7 can sometimes be less costly than having the case dismissed and filing a new Chapter 7 case. However, this option also has consequences, such as the potential loss of non-exempt assets, which may be sold to pay creditors.

Voluntary Dismissal and Refiling

In some situations, a debtor may choose to voluntarily dismiss their Chapter 13 case and immediately file a new one. This strategy can be effective if the debtor can demonstrate that the new plan is feasible and address the issues that led to the initial dismissal. However, this approach requires careful planning and a thorough understanding of the bankruptcy process.

Repeated dismissals and refilings can lead to scrutiny from the bankruptcy courts and may result in an order preventing the debtor from filing for a certain period. It is essential to work closely with a bankruptcy attorney to ensure that any new plan is viable and meets the requirements of the bankruptcy court.

Hardship Discharges

In some cases, debtors who experience significant changes in their financial situation may be eligible for a hardship discharge. This option is available under Chapter 13 but requires proof that the debtor’s circumstances prevent them from completing the repayment plan. Examples include severe illness, disability, or other significant life events.

A hardship discharge discharges the debtor from certain debts included in the bankruptcy, even if the repayment plan is not completed. However, this option is only available under specific conditions and requires approval from the bankruptcy court.

The Role of the Bankruptcy Trustee

The bankruptcy trustee plays a critical role in the Chapter 13 process. The trustee is responsible for reviewing the debtor’s repayment plan, collecting plan payments, and distributing funds to creditors. The trustee also monitors the debtor’s compliance with the plan and may file a motion to dismiss if the debtor fails to meet their obligations.

It is essential to maintain open communication with the bankruptcy trustee and promptly address any issues that arise during the repayment plan. Working collaboratively with the trustee can help ensure that the plan stays on track and prevent the filing of a motion to dismiss.

Avoiding Future Problems

To avoid future problems and potential dismissal, debtors should prioritize making timely plan payments and staying current on all mandatory payments, such as mortgage and car payments. It is also important to promptly report any changes in financial circumstances to the bankruptcy attorney and trustee.

Debtors should maintain accurate records of all payments and correspondence related to the bankruptcy case. This documentation can be crucial if issues arise and the debtor needs to provide proof of payments or other information to the court.

 

Filing bankruptcy with an attorney to address missed payments and negotiate a strict compliance order.

The Importance of Qualified Legal Help

Managing the complexities of a Chapter 13 bankruptcy requires expert legal assistance. A bankruptcy attorney provides valuable guidance from filing the initial petition to responding to a trustee’s motion to dismiss.

Choose an attorney experienced in bankruptcy law with a successful track record in handling Chapter 13 cases. An experienced attorney will help you understand your options, propose viable solutions, and advocate for you in court.

Facing a trustee’s motion to dismiss can be daunting, but with prompt action and effective communication, you can explore various options to save your repayment plan or pursue alternative solutions. Whether it’s proposing additional payments, negotiating a strict compliance order, or considering conversion to Chapter 7, it’s crucial to evaluate each option and make informed decisions.

If you are facing a motion to dismiss your Chapter 13 case, don’t wait. Contact Morgan & Morgan today for a free consultation with one of our experienced bankruptcy attorneys. We understand the challenges you face and are here to help you find the best solution for your financial situation. Call us now at (706) 843-2905 or fill out our online form to schedule your consultation. Take the first step towards regaining control of your financial future.

Top FAQs About Trustee Motion to Dismiss Chapter 13

How can I stop my Chapter 13 from being dismissed?

To stop your Chapter 13 case from being dismissed, you should:

  • Promptly respond to the trustee’s motion to dismiss.
  • Consult with your bankruptcy attorney to explore options for curing any delinquencies.
  • Propose additional payments, a lump sum payment, or a plan modification.
  • Ensure all future payments are made on time.
  • Communicate any changes in your financial situation to your attorney and the trustee.

What happens if a trustee is dismissed in Chapter 13?

If a trustee is dismissed in Chapter 13, a new trustee will be appointed to oversee your case. The new trustee will review your repayment plan and monitor your compliance. It is important to maintain open communication with the new trustee and address any issues that may arise.

What is a Chapter 13 dismissal refund?

A Chapter 13 dismissal refund occurs when a case is dismissed, and the trustee has funds that have not yet been disbursed to creditors. These funds are typically refunded to the debtor. The refund process can take some time, and the debtor should consult with their bankruptcy attorney to understand the timeline and any potential complications.

Can you negotiate with creditors after Chapter 13 dismissal?

Yes, you can negotiate with creditors after a Chapter 13 dismissal. Once the case is dismissed, creditors can resume collection efforts, and you may be able to negotiate payment plans or settlements directly with them. It is advisable to work with your bankruptcy attorney to ensure that any agreements are fair and in your best interest.

Key Takeaways

  1. Understand the Trustee’s Motion: A trustee’s motion to dismiss is a serious matter that requires immediate attention and action.
  2. Consult Your Attorney: Promptly consult with your bankruptcy attorney to discuss your options and develop a response plan.
  3. Propose Viable Solutions: Explore options such as additional payments, lump sum payments, or plan modifications to address delinquencies.
  4. Consider Conversion or Refiling: If the plan cannot be saved, consider converting to Chapter 7 or voluntarily dismissing and refiling a new Chapter 13 case.
  5. Stay Current on Payments: Prioritize making timely plan payments and mandatory payments to avoid future problems.
  6. Maintain Communication: Keep open communication with your attorney and the bankruptcy trustee to address issues promptly.
  7. Seek Qualified Legal Help: Choose an experienced bankruptcy attorney to guide you through the process and advocate on your behalf.

 

By following these steps and working diligently with your attorney, you can handle the complexities of a Chapter 13 bankruptcy and work towards a successful resolution.

 

Debtor discussing financial circumstances and future payments for a repayment plan with a bankruptcy trustee.

 

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