When Can Creditors Ask for a Bankruptcy Case to Be Dismissed?

 Posted on February 28, 2022 in Bankruptcy

When a debtor files for bankruptcy, this can put creditors in a difficult position. The discharge of a person’s debts will result in creditors not being paid what they are owed. Even if a debtor pursues a Chapter 13 bankruptcy, they will likely only pay off a portion of what they owe, and since certain debts are given priority in these cases, some creditors may be unable to recover a significant percentage of the debts owed to them. However, there are some cases where creditors may be able to request the dismissal of a bankruptcy case, which will allow them to resume collection activities and hold a debtor responsible for the amount they owe.

Reasons for the Dismissal of a Bankruptcy Case

In many cases, courts will dismiss bankruptcy cases because debtors fail to meet all of their legal requirements. Creditors may be able to pursue a dismissal in situations such as:

• The debtor failed to file the proper forms and documents - Multiple legal forms must be filed throughout the bankruptcy process, and other information must be submitted within the proper deadlines. If a debtor does not submit a complete list of creditors, fails to file tax returns or submit the tax returns they have filed to the bankruptcy trustee, or does not pay the required filing fees, their case may be dismissed.
• The debtor did not meet the qualifications for Chapter 7 bankruptcy - To receive a discharge of debts through Chapter 7, a debtor must pass a means test showing that their income is below the median income level in their area or that they do not have sufficient disposable income to repay a significant portion of their debts. If a creditor can show that a debtor is unable to pass the means test, they may ask for the court to dismiss the debtor’s Chapter 7 case.
• The debtor failed to complete credit counseling - Debtors must complete required educational courses prior to filing for bankruptcy and prior to receiving a discharge of their debts. Creditors may ask for a case to be dismissed if a debtor does not submit the proper certificates at the right times showing that these courses have been completed.
• The debtor did not make the required payments in a Chapter 13 repayment plan - In a Chapter 13 bankruptcy case, a repayment plan will be created in which a debtor will make monthly payments over a period of three to five years. Even one missed payment may allow a creditor to request that the bankruptcy case be dismissed, which will allow them to take action to collect the debts that are owed to them.
• The debtor committed bankruptcy fraud - Debtors may purposely falsify information about their income or assets or otherwise attempt to receive an illegitimate discharge without meeting the proper qualifications. Serial bankruptcy filers may also abuse the bankruptcy system by seeking a discharge of their debts multiple times after they have failed to be financially responsible. Creditors may be able to provide evidence that a debtor has purposely provided incorrect information or otherwise violated the law, allowing for a case to be dismissed so that the creditor may seek repayment for the debts that are owed.

Contact Our Chicago Bankruptcy Dismissal Attorneys

Dimand Walinski Law Offices, P.C. provides legal help and representation for creditors in bankruptcy cases. We work to help our clients determine when a dismissal may be available while ensuring that they take the correct actions when collecting debts. Contact our Chicago, IL creditors’ rights lawyers at 312-704-0771 for assistance with these matters.

Sources:

https://www.law.cornell.edu/rules/frbp/rule_1017