Can Bankruptcy Be Reversed?
Bankruptcy is a legal process designed to help people and businesses dealing with overwhelming debt. Bankruptcy can help debtors re-arrange or eliminate their debts. Once bankruptcy is filed, it might seem like the process cannot be reversed. However, under certain circumstances, bankruptcy can be reversed or dismissed. Whether a bankruptcy case can be reversed depends on several factors, such as the type of bankruptcy and the stage of the case. Below is a look at when bankruptcy can be reversed and the implications of a bankruptcy reversal.
Understanding the Types of Bankruptcies
Before discussing bankruptcy reversal and its implications, it is important to understand the different types of bankruptcy filings. The two most common types of bankruptcies in the United States of America are Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves selling your non-exempt assets and using the money from the sale to pay off creditors. On the other hand, Chapter 13 bankruptcy involves creating a plan to repay your debtors over usually three to five years. Both types of bankruptcies have different rules and procedures, and reversing a case may depend on the type of bankruptcy filed.
What Is a Bankruptcy Reversal?
What you are calling a “reversal” is most likely a dismissal. A dismissal happens when the bankruptcy court terminates the bankruptcy case. There are two types of dismissals: voluntary and involuntary. A voluntary bankruptcy dismissal, which is the focus of this article, is when you (the debtor) request that the court terminate your case. On the other hand, an involuntary dismissal is when the trustee, a creditor, or the court moves to terminate your bankruptcy case. Usually, this type of dismissal happens when there is non-compliance with bankruptcy requirements.
Reversing a Chapter 7 Bankruptcy Case
After you file for Chapter 7 bankruptcy, reversing or dismissing it can be quite challenging, but it is not impossible. A Chapter 7 bankruptcy case can be dismissed if the court determines the dismissal will not prejudice your creditors. In a Chapter 7 bankruptcy, creditors are entitled to payment from the sale of your non-exempt assets. If the court determines that a voluntary dismissal would deprive creditors of the opportunity to collect on outstanding debts, it will likely not grant the request. The court can grant a dismissal of your Chapter 7 bankruptcy if you have a compelling reason, such as;
- You filed the case in error
- Your financial circumstances have changed dramatically, allowing you to be able to repay your creditors
- You can negotiate a satisfactory repayment plan with your creditors outside of bankruptcy
Keep in mind that after you dismiss your case, the automatic stay will be lifted, and creditors can resume collection efforts.
Dismissing a Chapter 13 Bankruptcy Case
When you file a Chapter 13 bankruptcy case, you generally have the right to a voluntary dismissal at any time, as long as you haven’t converted your case to Chapter 7. It is vital to note that creditors can resume collection efforts after your Chapter 13 bankruptcy case is dismissed. Also, any foreclosure or repossession actions may proceed once your case is dismissed.
Contact Our Deerfield Beach Bankruptcy Lawyer
If you’ve initiated the bankruptcy process and are unsure whether to proceed or are considering requesting a voluntary dismissal, contact our Deerfield Beach bankruptcy lawyer at the Law Office of Adam I. Skolnik, P.A., for legal help.
