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Bankruptcy Chapter 13
Case Dismissal

Unfortunately, even though most people file their chapter 13 bankruptcy with the best of intentions, most chapter 13 bankruptcy cases end up dismissed because of failure to complete the plan. Statistics indicate anywhere from 50% to 85% of reorganization plans default. This FAQ deals with questions regarding a failed chapter 13 bankruptcy, the process of closing the filing, the aftermath after the chapter 13 ends and future financial options following case dismissal.  
Q. A crash of my chapter 13 bankruptcy reorganization plan looks inevitable, what should I do now?
A.You must look at this question from two points of view first what you need to do with your assets and personal finances and than what you need to do within the court system.
Q.What choices do I have left when I could not even make a chapter 13 work?
A. For the legal side you must decide if you want to let the chapter 13 get dismissed or if you want to convert your case to a chapter 7.
Q. How do I figure out if a chapter 7 bankruptcy would represent my best option?
A. Take a look at how a chapter 7 would help you and ways it might hurt you. If you can use a chapter 7 to your advantage you already have a bankruptcy on your credit report. On the other hand if it would make your situation worse just let your chapter 13 close and find other options to deal with the remaining issues.
Q.What can a chapter 7 bankruptcy do to help me?
A. Read the chapter 7 bankruptcy FAQ to get a full understanding of how a chapter 7 works, but the primary advantage of a chapter 7 comes in it’s ability to grant a complete discharge of all your debts.
Q. Can you give me an example of when a chapter 7 bankruptcy conversion makes a good choice?
A. Imagine you went into the chapter 13 bankruptcy with large credit card debts and a home mortgage that exceeded the home value. A chapter 7 would discharge both the credit card debt as well as the mortgage deficiency.
Q. What is a mortgage deficiency?
A. If you owe $200,000 on your mortgage and at the foreclosure auction the home only sells for $150,000, not only do you lose your house, but in most places you still owe the difference between what the property sold for and the debt. In this case a mortgage deficiency of $50,000.
Q. What if my only real debt revolves around the house, should I convert to a chapter 7 or just let the home foreclosure auction take place?
A. The answer would be similar to the case of someone trying to decide prior to any chapter 13 filing if foreclosure vs. bankruptcy chapter 7 represents a better choice.
Q. When would I want to stay away from a chapter 7 bankruptcy conversion when my chapter 13 fails?
A. For people with a home and a mortgage seriously in arrears you can bet a chapter 7 will not help keep your house.
Q. If a chapter 13 bankruptcy failed what chance do I have to stop a foreclosure?
A. While you remain in the middle of a chapter 13 banks will not entertain loan modification negotiations. Once your chapter 13 gets dismissed you may open mortgage modification discussions.
Q. What chances do I have to get a loan modification if I ended up in a chapter 13 in the first place?
A. It depends why you ended up in the chapter 13 in the first place. For people who filed because they got a very late start on stopping their foreclosure and chapter 13 bankruptcy ended up as their only option chances may be good.
Q. What circumstances would make for a good case?
A. As discussed in the FAQ on filing a chapter 13 bankruptcy the reorganization plan required to complete a chapter 13 means monthly mortgage payments go up when the debtor includes the bankruptcy trustee payments. Most mortgage holders just want money, not possession of your property, so if they can live with a plan that provides for lower mortgage payments and they feel you can make all payments they would probably prefer that to foreclosure.
Q. I tried to talk to the bank before I filed the chapter 13 bankruptcy and got nowhere, what would make if different after the chapter 13?
A. One big change could come if you choose to hire a professional mortgage modification negotiator to help instead of attempting the process on your own. You might have also made the path to a modification easier if you proved you could make some payments. Look at a case where the people had not made mortgage payments for two years prior to chapter 13 filing. In the chapter 13 they may their mortgage payments regularly and on time, but could not afford the trustee portion and the bankruptcy reorganization plan failed. The bank may now feel confident that if they moved the arrearage to the end of the loan that you could at least make the standard payment while before you proved your ability to pay in the bankruptcy they were only looking at the two year history with no payments and did not want to enter into any negotiations at all.
Q. What if I make too much money to qualify for a chapter 7 under the means test?
A. For people with substantial unsecured debt who end up facing a discharge of their chapter 13 you could look at either letting it get dismissed or amending your plan to primarily deal with the credit card debt or other unsecured debt.
Q. What kind of amended plan would work when I just tried a chapter 13 plan ready to fail?
A. In most cases chapter 13 bankruptcy reorganization plans that crash end up that way because the debtor could not afford to make the mortgage payments and trustee payments including the mortgage arrearage. For people facing a chapter 13 dismissal who realize they will not keep the house but still need to deal with substantial credit card debt or mortgage deficiency, an amended chapter 13 filing that deals with only the unsecured debt and provides for the home to be sold either on the open market or through foreclosure often reduces payments to the point the new amended plan can succeed.
Q. Can I amend my plan or file a new bankruptcy where I might keep the house?
A. Filing a new bankruptcy given the latest bankruptcy filing laws ranges from hard to impossible, you should consult your bankruptcy lawyer for how that would work for your own circumstances. As for amending a failed plan you could try, but you better come to court with a very good reason to show the bankruptcy judge how you think the new plan could work when the old one failed and have evidence to back up your claim. 
Q. What does the foreclosure process look like when looking at a failed chapter 13?
A. The foreclosure process after a chapter 13 bankruptcy operates no differently than foreclosure before a chapter 13. The issue center more around where the bank sat in the foreclosure process before you filed the initial chapter 13 and when they get to resume the foreclosure process.
Q. Do my choices matter in how they proceed with foreclosure?
A. Yes, as long as you remain in bankruptcy the bank must get a bankruptcy judge to issue an order of “Relief from Stay” for them to restart the foreclosure. If you or the court dismisses the case the bank may proceed without restriction.
Q. So I end up better off if I let the court dismiss my chapter 13 case and not rush things?
A. If staying in the home as long as you can prior to foreclosure stands as your only goal perhaps yes. For people who feel the opportunity to negotiate a mortgage modification and keep the home looks strong dismissing the chapter 13 and diving into mortgage modification discussions quickly as possible might be better.
Q. If I dismiss my chapter 13 bankruptcy because I wanted to try a modification and those negotiations fail can I restart or refile my chapter 13?
A. No, once a chapter 13 gets dismissed you may not restart it, and filing a new one might not be an option.
Q. When should I move out of my house?
A. Read the foreclosure process FAQ for more on this, but don’t rush.
Q. Does converting my chapter 13 bankruptcy to a chapter 7 bankruptcy extend the stay and continue to prevent the bank from proceeding with foreclosure?
A. Yes, but chapter 7 bankruptcy laws do little or nothing to help you object to a bank’s motion for relief from stay allowing them to foreclose. Once a chapter 13 fails, remaining in the bankruptcy system through a conversion to chapter 7 bankruptcy represents more of a delay than a way to permanently stop a foreclosure.
Q. Does the chapter 13 bankruptcy filing come off of my credit report because I dismiss the case?
A. No, once you file a chapter 13 bankruptcy is stays on your credit report for 7 years. While in a bankruptcy almost no one will grant you new credit, so an advantage of ending a bankruptcy case can be rebuilding credit and improving your credit score becomes easier.
Q. If my chapter 13 bankruptcy gets dismissed what happens to all my debt?
A. Nothing, you owe it just as if you had never filed a bankruptcy in the first place.
Q. What about any money I paid the bankruptcy trustee to pay my debts?
A. Money that the trustee paid to creditors gets credited to you at a dollar on a dollar. For example it your chapter 13 bankruptcy called for you to pay credit card debt at ten cents on the dollar and you paid 100 dollars on a credit card, you credit card debt after the dismissal would account for the 100 dollars paid and be 100 dollars less. Since you did not complete the plan even though your 100 dollar payment would have coved 1000 dollars of debt in the plan you lose that advantage by dismissing the chapter 13 bankruptcy case.
Q. How soon do I need to resume regular payments on things once my chapter 13 ends?
A. Right away, in fact depending on what you paid while in the chapter 1 bankruptcy you may find yourself very far behind and soon as the chapter 13 concludes.
 

Bankruptcy Questions, Answers and Information

Bankruptcy FAQs
Chapter 7 Bankruptcy FAQ
Chapter 7 vs. Chapter 13 Bankruptcy FAQ
What is Chapter 13 FAQ
Chapter 13 Bankruptcy Calculator
Who Should File Chapter 13 Bankruptcy FAQ
Chapter 13 Bankruptcy Process Questions
Bankruptcy FAQ – Chapter 13 – Case Dismissal
Bankruptcy vs. Foreclosure FAQ
Bankruptcy Lawyer FAQ Part I - Find An Attorney
Bankruptcy Lawyer FAQ Part II - Hire An Attorney
Bankruptcy and Tax Debt FAQ
Student Loan Debt in Bankruptcy FAQ
Non-Bankruptcy Solutions Vs. Bankruptcy FAQ
Bankruptcy Information
Bankruptcy Alternatives - Debtor's Options
US Federal Personal Bankruptcy Exemptions
US States Personal Bankruptcy Exemptions
Table Of Which US States Use Federal Exemptions
Bankruptcy Abuse Prevention Act - 2005
Chapter 11 Overview
Bankruptcy Forms
Dictionary Of Bankruptcy Terminology

Bankruptcy Alternatives
& Debt Or Credit Help


Bankruptcy Alternatives - Debtor's Options
Stop Home Foreclosure Help Articles And FAQs
How To Stop Foreclosure Options Explained
Foreclosure Process Information FAQ
Short Sale FAQ
Deed in Lieu Of Foreclosure FAQ
Understanding And Erasing Credit Card Debt
Credit Card Debt Relief - Debt Settlement
Free Online Credit Improvement Course
Credit Rebuilding Article
Understand Credit Score
Loan Options For Bad Credit Borrowers
Directory Of Bad Credit Mortgage Brokers
Credit Cards For People With Bad Credit Articles
Free Interactive Budget Calculator And Analysis
Who To Pay When You Can't Pay Everyone
How To Get Money When You Need Money
Debt Calculators

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