In my previous blog, Bankruptcy Dismissal vs. Bankruptcy Discharge, I explain these two important bankruptcy terms. Regarding dismissal, I wrote …bankruptcy filings end up being dismissed or closed by the bankruptcy court. This can happen under three circumstances. First, when you choose not to proceed with your bankruptcy case. Two, you are not able to comply with all the requirements. Or three and worse, you committed bankruptcy fraud. I often get contacted by people after the dismissal of their case. To clarify, I get contacted mostly when the dismissal did not happen of a volunteer basis. I am called in to resurrect a case that the court threw out because of error, neglect, or fraud. Maybe it was caused by your lawyer. Maybe you attempted to represent yourself and filed without a lawyer, or “pro se.” Regardless, a dismissal of your bankruptcy case does not necessarily mean it is over.
Reasons for Dismissal
For a case to move forward after its dismissal, we need to know why this happened in the first place. The most common reasons, outside a volunteer dismissal, include:
- Failure to file the proper forms and documents
- Failing to pay court filing fees
- Inability to pass the means test
- Not completing the required courses (credit counseling course and debt management course)
- Not attending the 341 meeting or the meeting with creditors
- Failure to make Chapter 13 payments
- Bankruptcy fraud – not accurately disclosing all your income, assets, liabilities, and other required financial information
In reading the above list, you may think that the process is overwhelming, and the court dismisses cases all of the time. In reality, dismissals of bankruptcy cases where the debtors are represented by competent counsel are not that common. That is not true of “pro se” cases, which means cases where the debtor does not hire counsel and files on their own (or sometimes with the “help” of a friend or a “petition preparer”). Statistically, in New Jersey, almost 75% of pro se cases are dismissed and the debtors do not receive a discharge. In those cases, the bankruptcy ends up hurting your credit and, since you do not get the discharge, it does not give you any benefit. If you do it right and get your discharge, you can usually rebuild your credit very quickly.
Assuming you hire a lawyer, your bankruptcy lawyer should be able to guide your through the process. In doing so, he or she should avoid these reasons for dismissal. Unfortunately, too many people come to me after the dismissal of their case. They do not understand the causes for dismissal. Further, when I look at the facts, I sometimes find the previous lawyer improperly handled the case. This happens most often when the debtor tried to hire someone “cheap” and … you guessed it, they got what they paid for… and their case got dismissed.
The good news is that, in most situations, except for dismissal with prejudice, or for reasons involving “bad faith,” you can usually seek to vacate the dismissal, and have your case reinstated. To have your case reinstated, you must submit the required or correct documents and correct any other deficiencies. That may mean that you have to catch up on your payments in order to have your case reinstated, which is often impossible.
Alternatively, if you can’t have your case reinstated, you can usually file a new case. Filing a new case brings new challenges as well. First, you will only have the benefit of the automatic stay for 30 days unless you take the proper steps to have it extended. In addition, the trustee, your creditors, and the Court are already scrutinizing your case due to the prior dismissal. These are just a couple of reasons it is critical to be sure you hire competent counsel.
If you are considering filing bankruptcy in New Jersey, contact Karina Lucid Law for a free initial consultation. Likewise, call us if your case was dismissed. We can review your bankruptcy dismissal, find out what went wrong, and give you options to move forward.