Originally published: November 29, 2015 — Updated: August 10, 2021
UPDATE: In addition to understanding how the dismissal of a bankruptcy case may affect their ability to refile for bankruptcy and address their debts, a person will also need to understand how foreclosure proceedings will be affected. An initial bankruptcy filing will place an automatic stay on any collection actions, meaning that creditors will be required to cease all attempts to collect the debts owed or repossess property. This automatic stay applies to foreclosure proceedings, so by filing for bankruptcy, a person may be able to prevent the loss of their home. However, if a bankruptcy case is dismissed, a person is returned to the same position they were in before filing for bankruptcy, and creditors will be able to resume foreclosure proceedings.
A recent case in Pennsylvania illustrates how the dismissal of a bankruptcy case may affect foreclosure proceedings. In this case, a homeowner filed for Chapter 13 bankruptcy to prevent the foreclosure of their home. Because the debtor did not file all of the necessary documents, the bankruptcy court dismissed their case. The debtor filed a motion for reconsideration, and the court granted this motion and reinstated the bankruptcy case. However, between when the case was dismissed and when it was reinstated, the lender resumed foreclosure proceedings and sold the home. While the debtor argued that the automatic stay for the initial bankruptcy filing should have applied, the court ultimately ruled in the lender’s favor, finding that the lender was allowed to resume foreclosure proceedings following the dismissal of the case.
This case shows the importance of working with an attorney to ensure that the correct procedures are followed when filing for bankruptcy. An experienced lawyer can make sure a borrower submits all required information and completes all of the necessary steps during the bankruptcy process. This will ensure that a case will not be dismissed and that a person will be able to receive relief from their debts. To get legal help with bankruptcy, foreclosure, or other debt-related issues, contact our Waukegan foreclosure defense attorneys at 847-549-0000 and schedule a free consultation.
Bankruptcy cases are not always straightforward. In fact, they often require a nuanced look at all the elements present in the case to determine that all parties are able to receive their fair share of the money they are owed.
The court is not required to grant all bankruptcy petitions. When it finds that a bankruptcy case does not comply with the applicable laws or would not be an economically viable choice for the indebted party or his or her creditors, it may dismiss the case. One recent example of a high-profile bankruptcy case dismissal is the case of BlackAMG’s Chapter 11 bankruptcy claim. In November 2015, Illinois judge Elaine E. Bucklo ruled that the court was within its right to dismiss the company’s Chapter 11 reorganization plan, despite BlackAMG’s creditor, Northbrook Loans, LLC, arguing that it would be better economically to convert the case to a Chapter 7 bankruptcy. The difference between Chapter 7 and Chapter 11 bankruptcy is broad. With Chapter 7, the indebted party’s nonexempt assets are sold off and the profits are used to satisfy his or her debts while Chapter 11 allows the indebted party, generally a corporation or a partnership, to continue to operate under a reorganization plan and repay its debts from its profits over a period of time.
What if My Case is Dismissed?
Depending on why your case was dismissed, you might be able to refile right away. If you can not refile right away, work with your attorney to determine what you need to change about your bankruptcy petition to have it accepted by the court.
When a bankruptcy case is dismissed for procedural reasons, meaning that the petitioner did not follow the court’s procedures and might have missed a deadline or filed the wrong forms, he or she can refile right away. This is known as dismissal without prejudice.
Dismissal with prejudice refers to cases where bankruptcy is rejected because of dishonesty or abuse on the part of the petitioner. Examples of cases that may be dismissed with prejudice include those where the individual attempted to hide assets or filed the case in bad faith.
Individuals whose cases are dismissed with prejudice may be barred from filing for bankruptcy again for a specific period of time or even barred from discharging those specific debts forever.
In any case where a bankruptcy petition is dismissed, the individual loses the protection of the automatic stay. This means his or her creditors can resume their collection attempts until he or she gains bankruptcy protection again by successfully filing a case.
Work with a Chicago Bankruptcy Attorney
Bankruptcy is complicated. No two bankruptcy cases are alike – each has to be carefully developed around the bankrupt party’s individual needs. If you are considering filing for bankruptcy, work with an experienced Illinois bankruptcy attorney to ensure that your rights are protected and your interests are represented accurately to the court. Contact our team at [[title]] today to schedule your free legal consultation with our firm. We are here to help you get through your bankruptcy as smoothly as possible.