The Bankruptcy Code explicitly says that, at the request of the person in a Chapter 13 case, the bankruptcy “court shall dismiss” the case.
The last three blog posts have been about amending, or “modifying,” your Chapter 13 payment plan. But what if you don’t want to be in the Chapter 13 case at all? Can you just end it altogether?
Yes, almost always you can end a Chapter 13 case, by getting it “dismissed.”.
A Clearly Stated, Special Right
You can dismiss a Chapter 13 case easily because the Bankruptcy Code says you can, and says so very clearly:
On request of the debtor at any time… the [bankruptcy] court shall dismiss a case under this chapter .
(Section 1307(b) of the Bankruptcy Code.)
Two parts of this deserve to be highlighted:
- You can ask for a dismissal “at any time”—at any point in the life of a Chapter 13 case. So you can dismiss it soon after filing, if you realize you’ve made a mistake and change your mind. And you can dismiss your case after your payment plan has been approved by the court, for example, if your circumstances change and you don’t want to be in it any more.
- The law says that “the court shall” dismiss the case whenever you ask. This seems to mean that the bankruptcy court doesn’t have any choice about it. The wording isn’t that the court “may” but rather that it “shall” dismiss your Chapter 13 case.
As a result if you ever want your Chapter 13 case dismissed, usually within a day or so of your bankruptcy lawyer filing a motion to dismiss your case will be dismissed.
Be aware that there isn’t a similar statute enabling the easy dismissal of a Chapter 7 “straight bankruptcy” case. So this is a powerful right special to Chapter 13.
Why Is This Reserved for Chapter 13?
Most likely Congress included this right to provide an incentive for people to file under Chapter 13. Naturally you’ll be more inclined to try a particular legal solution if you can always get out of it. The idea is to encourage people to pay part of their debts instead of writing them off under Chapter 7.
In fact Congress thought this right to dismiss so important that you can’t be forced to give it up. The statute finishes by saying: “Any waiver of [this] right to dismiss… is unenforceable.” (Section 1307(b)) You can‘t be forced to sign away this right by contract or otherwise.
The Importance of the Dismissal Option
A Chapter 13 case lasts a long time compared to a Chapter 7 case—usually 3 to 5 years. A lot can happen during that time. So it can be important to be able to get out.
The major reason you filed your case may no longer apply. For example, you may have filed to catch up on home mortgage payments but you get a job out of state. So now you decide to surrender or sell the home instead, and don’t need the Chapter 13 case.
Or your financial circumstances change so that you don’t need Chapter 13 help, or else it doesn’t help you enough. In the example of being behind on your mortgage, if you came into some money you might be able to quickly catch up and no longer need the time that Chapter 13 buys you. Or your income goes down significantly so that you can’t catch up even within the extended time Chapter 13 provides.
In these and countless other circumstances, it’s good to be able to get out if that’s your best option.
But IS Dismissal Your Best Option?
As easy as it is to do, simply dismissing the case is often not your best option. That’s because most likely you have debts which you would continue to owe. Chapter 13 does not result in a “discharge”—legal write-off—of your debts until its successful completion. So if you dismiss before then you will continue to owe those debts. It may be better to instead “convert” into a Chapter 7 case. But there are situations when dismissal is the best. We’ll address these issues in the next few blog posts.
Can You Definitely Dismiss Your Case If You Want To?
In spite of what we said about the clear language in the statute, there may be some extreme situations when a debtor could not dismiss a Chapter 13 case.
There has been debate among bankruptcy judges about this. Some have decided that in situations of serious debtor abuse or fraud, the debtor can’t escape the jurisdiction of the court by simply getting his or her case dismissed. There may be other statutes or legal principles that can defeat even the clearly stated right of dismissal. So in limited situations a judge might prevent a Chapter 13 case from being dismissed.
However, in the vast majority of situations, just about as soon as you ask your Chapter 13 case will be dismissed.