In the current economic climate, many people are having difficulty meeting their financial obligations. As unpaid bills pile up, debt continues to accumulate and multiply. At some point, the most practical solution to a personal financial crisis may be to file for bankruptcy in order to start over with a clean financial slate.
How Chapter 13 Bankruptcy Works
Chapter 13 is a section of the bankruptcy code that allows individuals and certain small business owners to establish a repayment plan to repay a portion of what they owe their creditors. Chapter 13 bankruptcy differs from Chapter 7 bankruptcy in that it is more of a “reorganization” than a “liquidation”.
In a Chapter 13 bankruptcy, the individual will be assigned a debt repayment plan by the bankruptcy courts. Payments are made to a bankruptcy trustee who in turn makes payment to the creditors according to the specific terms laid out in the case. Terms will vary from case to case,, but generally involve some payments to individual creditors (credit card, medical bills, car payments, mortgage payments, etc.). Assuming the repayment plan obligations are completed the individual is often able to hold onto important assets, like their home or car. It is also possible that after payments are made for a period of time, the debt may be “discharged” or written off, meaning the individual is absolved from paying the remainder of the debt.
Why Chapter 13 Bankruptcy Cases Get Dismissed
Chapter 13 bankruptcy cases are generally extremely detailed and complex, involving multiple creditors, specific deadlines and lengthy paperwork that is not provided in an easy-to-read format. Sometimes an illness or other circumstance will prevent an individual from fully complying with Chapter 13 filing guidelines, but more often it is inexperience or lack of knowledge about local bankruptcy laws that results in a case being dismissed. According to the American Bankruptcy Institute, nearly 50% of the Chapter 13 bankruptcy cases filed by an individual without the assistance of an attorney (referred to as pro se) are dismissed within three months of filing and more than 80% are dismissed within six months.
Here are the most common reasons for Chapter 13 bankruptcy case dismissals:
- Missing court deadlines.
- Failing to pay the court filing fees.
- Forgetting to file the necessary paperwork.
- Failing to submit appropriate documentation to either the bankruptcy trustee or the courts.
- Failing to attend the meeting of creditors.
- Failing to attend a debtor education class.
- Failing to make Chapter 13 term payments on time.
- Failing to file a tax return.
What To Do If Your Chapter 13 Case Is Dismissed
One of the biggest benefits of filing for bankruptcy is the automatic stay, which prevents creditors from taking any debt collection actions such as garnishing wages, making harassing phone calls or trying to repossess property. If a Chapter 13 is dismissed for any reason, the automatic stay will no longer be in place and creditors will resume collection activities. In addition, you may find yourself in worse shape financially – due to the growing interest on the unpaid debts.
If your Chapter 13 case is dismissed, you may be able to immediately refile another Chapter 13 case or file an appeal to have the original Chapter 13 case converted to a Chapter 7 case. It is important to realize that the ability to pursue one of these options will be dependent on the reason(s) for dismissal as well as a variety of other factors. Particularly if your first Chapter 13 case was dismissed, it is highly advisable to work with an experienced bankruptcy attorney.
What To Look For In A Baltimore Bankruptcy Attorney
If you’re struggling with more debt than you can manage and have gotten behind on your home mortgage and car payments, a Chapter 13 bankruptcy may be an option to save your property and pay off your debts. But, don’t go at it alone – filing for Chapter 13 is arduous, and a dismissal could leave you in worse financial shape. A reputable and experienced Maryland bankruptcy attorney can help you navigate through this complex process. Contact Sirody & Associates at (410) 415-0445 for more information about filing for Chapter 13 bankruptcy.