You file for bankruptcy when you want to stop harassment from creditors. By filing, the law protects you from any debt collection activities by your creditors through automatic stay protection until the debt is discharged or bankruptcy ends due to other reasons. However, before you obtain debt discharge from the court, you must comply with several procedural rules, like cooperating with the court-appointed trustee and being honest. When you fail to adhere to these rules, the judge dismisses your case early, eliminating the protection you enjoy.

The court can dismiss the bankruptcy case with or without prejudice. A dismissal without prejudice is better because it allows you to bring another bankruptcy petition immediately after correcting the errors leading to the initial dismissal. Again, this dismissal will enable you to extend the automatic stay or seek new protection immediately after you lodge a new case. Discussed further is dismissal without prejudice and its effects on protection from debt collection measures by creditors.

Understanding Bankruptcy Dismissal Without Prejudice

Before being eligible for bankruptcy discharge, you must obey the legal procedures provided. Otherwise, the judge will dismiss your application before discharging your debt. If you declare insolvency, it means your debt is overwhelming, and you are looking for a way to clear the debt and halt the harassment by creditors. If you do not fulfill or meet the court’s requirement, the presiding judge will involuntarily dismiss your file with or without prejudice.

While having the petition for bankruptcy relief dismissed can be discouraging, you can shortly lodge another petition. If your dismissal was without prejudice, the bankruptcy court will allow you to bring another case before them immediately without restricting the time you should wait before filing. Many bankruptcy relief motion dismissals are without prejudice, meaning the filer can immediately bring a new case before the court.

However, when the court establishes that you abused the bankruptcy system by trying to exploit creditors or engaged in serious misconduct like bankruptcy fraud, the bankruptcy court will issue a dismissal with prejudice. Under these circumstances, the law bars you from submitting another application for bankruptcy relief within three to twelve months. The ban could be permanent in severe cases, meaning you can never declare bankruptcy again.

Reasons for Dismissal Without Prejudice

The judge will dismiss your case without prejudice if there were procedural mistakes during filing and there is no proof that you were attempting to abuse or manipulate the system. Unless there is proof of an attempt to abuse the system, the bankruptcy judge will allow you to file immediately. The common reasons for dismissal without prejudice:

Not Submitting Required Forms and Paperwork with The Court or Court-Appointed Trustees

Most dismissals without prejudice happen because of filling out bankruptcy relief forms wrongly or not providing the requisite supporting documents. The application process entails filling out several forms, including petition forms and schedules. If you do not submit all the relevant forms, they will dismiss your case, forcing you to start the process afresh.

One of the supporting documents you should submit is the petition for filing individual forms. These require you to submit your identifying information, such as:

  • Your social security number
  • The names of your businesses
  • The bankruptcy type you intend to declare
  • Your preferred mode or plan of paying the filing fees
  • Whether or not you have sought bankruptcy relief in the last eight years
  • The status of your home rental
  • Whether you own hazardous properties
  • Whether you have enrolled and completed a credit counseling program

In joint petitions, you must provide your spouse's details in this form.

Another form you should complete is the A/B schedule form. This requires you to provide details of your properties, like real estate, motor vehicles, watercraft, financial assets, money people owe you, commercial properties, household items, personal items, and other assets.

Also, you should submit the Schedule C form where you list your exempt property. If you do not understand the properties you should list in the form, consult with your bankruptcy attorney to understand these properties. If you include or exclude the wrong property on the list, you could be forced to file a voluntary case dismissal before discharge to save your property. There is no guarantee the judge will approve the request, making it necessary to file it correctly the first time.

Again, you must complete the Schedule C form listing collateralized debt and the property used as collateral. It is the property used to secure debt.

Schedule E/F is the other form you should fill out. It prescribes unsecured claims like child support, alimony, tax obligations, and wrongful death or personal injury claims stemming from intoxication.

Other forms include:

  • Schedule G, outlining unexpired rental leases and contracts
  • Schedule H, stating your co-debtor
  • Schedule I, where you divulge your income
  • Schedule J stating your monthly expenditure

All these forms are available on the trustee’s site. If you do not understand all the required forms and the supporting documents you must furnish the trustee with, speak to a bankruptcy attorney for help. An attorney will ensure you do not make minor errors that could lead to a dismissal without prejudice. Even if the dismissal allows immediate filing, a denied discharge means you could wait longer before obtaining a debt discharge.

Skipping Creditor Meetings

Creditor meetings allow the court-appointed trustee who will discharge your debt to ask questions regarding your debt and financial position. These trustees administer these questions under oath. Attending the meeting lets the trustee verify your information, including the identifying details. You should not skip the meeting because it only takes a few minutes of your time, and creditors usually do not attend. Skipping the meeting without legitimate reasons will cause the court to dismiss your petition.  

Not Paying the Filing Fees

The court requires you to pay a filing fee to help with case administration. Under Chapter 7, or liquidation bankruptcy, you can negotiate with the court to pay the fees in installments if you cannot afford to pay upfront. If the court agrees to your request but fails to make the scheduled payment, they will dismiss your bankruptcy petition for failure to pay the requisite fee.

Not Honoring Chapter 13 Payment Plan

When you declare bankruptcy under Chapter 13, the court allows you to develop a debt repayment plan because the problem is not that you cannot afford to make payments, but you have problems managing your funds to repay debt. So, the court allows you to develop a three- to five-year plan to repay your debtors monthly. If you create the plan but fall behind on payments, the court can dismiss your case before debt discharge, but there is no time limit for when you can refile.

You are Ineligible For Chapter 13 Bankruptcy

Chapter 13 is for individuals with a sufficient monthly income to repay debt but struggle to pay it because of poor management. If you are in this situation, you are eligible for this form of bankruptcy. It allows you to keep all your properties, accounts, and assets and develop a repayment plan instead.

You qualify for this bankruptcy if your income tax returns for the last four years are up to date. If, at the time of filing, you were not up to date with your return filing, the bankruptcy will postpone your case until your records are updated. Failure to submit proof of filing before the hearing means they will dismiss your case without prejudice. Once you have your income tax return records in order, you can submit another case.

Another condition for declaring insolvency under this chapter is enough monthly disposable income. You should submit evidence to the court demonstrating that you have sufficient disposable income to pay the debt after deducting your expenses and secured debt from your income. Your plan should demonstrate the capacity to repay some debts in full, or the court may dismiss your case. If you are not working but married, you can mention your spouse’s income as your own to qualify for this bankruptcy.

Besides, your unsecured and secured debts should not exceed a particular amount. Talk to your attorney to understand debt limits under this chapter and the techniques you can employ to be eligible because if your debt is exceptionally high, the judge will dismiss the case, forcing you to apply again.

Lastly, the bankruptcy court will issue a dismissal without prejudice when you declare bankruptcy as a business under this chapter. Before filing, consult an experienced bankruptcy attorney to establish if your case qualifies under this chapter. If you are ineligible, the attorney will employ various strategies to make you eligible and prevent a case dismissal.

Failure to Complete Compulsory Credit Counseling

Many filers must undergo bankruptcy counseling before filing. The court imposes the program as a condition you must satisfy before discharging your debt. The program entails undergoing credit counseling with a non-profit credit counseling entity. The program aims to establish whether you can feasibly manage debt outside bankruptcy.

Before filing for bankruptcy, you should satisfy these conditions:

  • You must disclose all your personal and financial information by completing bankruptcy forms
  • Prove you completed a credit counseling program six months before filing
  • Pay the full filing fees in installments

The proof the court requires to show you have completed the credit counseling course is the completion certificate. You should submit this proof within fifteen days of the filing.

The course aims to help you determine if you qualify to file or if you should go for an informal repayment plan.

The agency doing the counseling prepares a budget to establish your disposable income and determine your best bankruptcy type. You do not need to adopt the agency's recommendations. You just have to show that you enrolled and completed the program and that a certificate is available to prove the same. However, you must submit the bankruptcy forms and the entity’s recommendations.

If you do not complete the program and submit a completion certificate together with the bankruptcy forms, your case will be dismissed, and you will have to file a new petition after you enroll and complete the course. 

Bankruptcy Dismissal Process

Bankruptcy case dismissal starts when you, the debtor, court-appointed trustee, or creditors initiate the process. A dismissal petition can be voluntary or involuntary. A voluntary dismissal is when you request the court to dismiss your petition after filing.

Under Chapter 7, or liquidation bankruptcy, you can request a voluntary dismissal if, after filing, you discover that you will lose more property than you anticipated through the process. However, there is no guarantee they will agree to your request. The court only grants a voluntary dismissal if it serves the interests of creditors.

Chapter 13 is easy to dismiss because you only notify the court of your intentions to dismiss, and they will accept your request. Nevertheless, you should know that the protection you enjoy from automatic stay lessens once you opt-out. Some creditors will be free to participate in debt collection activities. Therefore, once the court throws out your case, you should immediately file another to restore the protection.

When a third party, like a trustee or creditor, requests the court to dismiss your case, it is known as involuntary dismissal. These parties petition the court if they notice dishonesty in filing or refusal to cooperate with the bankruptcy trustee.

Protection Lessens When You Refile

Immediately the court receives your bankruptcy file, an automatic stay takes effect. The stay is a court order that bars creditors from filing lawsuits or engaging in debt collection activities. With the protection, the order will stop the foreclosure if a debtor forecloses a home. However, your preferred bankruptcy chapter depends on whether you will retain the property. Under liquidation bankruptcy, you will lose the home because the bankruptcy trustee will sell it and use the proceeds towards debt repayment. However, in chapter 13, you will keep the house.

Similarly, the court order temporarily halts an eviction by landlords if there is no judgment ordering eviction. If the landlord has a judgment, the automatic stay will not stop eviction. They will implement the judgment as if you did not declare bankruptcy. Further, if the property manager proves you use controlled drugs or are endangering the property, an automatic stay will not help.

Also, the court orders will bar utility bill companies from engaging in any disconnection if you have fallen behind with payments. However, you will rarely find anyone declaring bankruptcy because of a utility bill. Nevertheless, if the bills are part of your debts, an automatic stay after filing can prevent power or water disconnection due to accrued bills.

The orders also stop the IRS from seizing property due to unpaid taxes or issuing a tax lien.

You should know the protection lasts until the court discharges your debt. However, they can start debt collection even before the discharge if they petition the court to lift the protection and the court grants their application. The court grants the request if the lender shows they will suffer financial harm because of the protection you enjoy and that other creditors will not financially benefit from the stay orders. 

For example, the judge grants a motion to lift automatic stay orders if you declare bankruptcy a day before property foreclosure, cannot catch up with payment, or lack equity in the home.

The filer is not the only party that benefits from an automatic stay. Creditors benefit, too, because the court-appointed trustee controls the filer’s property. The trustee evaluates the property and shares its proceeds among creditors based on the provisions of bankruptcy statutes. Thanks to the bankruptcy, each creditor receives the amount they are entitled to.

Effects of Filing Multiple Times on Automatic Stay

You can refile immediately after the court throws out your bankruptcy case without prejudice. However, doing so several times lessens the protection of the automatic stay injunctions.

Typically, if it is your first petition in twelve months, the court grants automatic stay without limitations. However, if you filed an insolvency case that was dismissed, filing another one within a year only grants you thirty days of protection from creditors. When at least two cases are dismissed without prejudice within twelve months, a third one within the same window will not result in an automatic stay. The court will not protect you from creditors or lenders for a third bankruptcy in twelve months.

You should know that if the court grants a short automatic stay period that you are entitled to, you can request an extension, but only if you have proof you declare bankruptcy in good faith.

Extending Protection After Multiple Filing

When you are filing for insolvency, before the court grants orders prohibiting debt collection, you must give reasons why your petition is in good faith, schedule a motion proceeding date within 30 days of the filing date, and serve creditors and bankruptcy trustees on time. An experienced bankruptcy attorney can help if you have challenges meeting these deadlines.

Repeat filing the court deems in bad faith involves attempts to deter eligible creditors from receiving payments or manipulate the bankruptcy system. Some filers engage in repeat filing and voluntary dismissal to delay payments to creditors. If the court notices this, they will establish you are acting in bad faith and deny automatic stay.

Find a Proficient Bankruptcy Attorney Near Me

A dismissal of your bankruptcy case without prejudice is not entirely bad because you can refile immediately to enjoy an automatic stay. Nevertheless, repeat filing lessens protection from creditors. At the Los Angeles Bankruptcy Attorney, we understand you could have genuine reasons for multiple refiling. Therefore, when refiling, we will detail these reasons to ensure the court does not deny automatic protection. Also, we will ensure the mistakes of the previous filing are not repeated to avoid a dismissal. Call us at 424-285-5525 to discuss your case.