You should not make a decision to file for either Chapter 7 or Chapter 13 bankruptcy without giving it serious thought and consulting an experienced attorney about the benefits and downsides. Once you file for bankruptcy, you cannot simply withdraw your bankruptcy petition as if you never filed it in the first place. The bankruptcy stays on your record. However, you can withdraw from the bankruptcy process by obtaining a dismissal. At Grainger Legal Services, an Alabama bankruptcy lawyer can help you decide whether to file for bankruptcy in the first place or obtain a dismissal.
After you file for Chapter 7 bankruptcy, your property becomes the property of a bankruptcy estate controlled by a trustee. In a Chapter 7 bankruptcy, you can keep any of your property that is exempt, but the trustee can sell the nonexempt property in the bankruptcy estate to pay your unsecured creditors. Therefore, obtaining a voluntary dismissal will require you to explain your reasons for requesting dismissal to a judge.
Generally, if you own non-exempt assets, your creditors will be adversely affected by your withdrawal from a Chapter 7 bankruptcy. In some cases, it may be possible to get your case dismissed by the court for a failure to complete certain tasks, such as not appearing at the mandatory meeting of the creditors, or failure to send documents in a timely manner to the trustee. If you fail to comply with various requirements, your case will be dismissed if you do not have non-exempt assets that could be used to satisfy your debts. However, if you have non-exempt assets, you will likely need to show good cause to get your case dismissed, even if you failed to comply with the mandates of Chapter 7.
Under Section 707 of the Bankruptcy Code, a Chapter 7 case may only be dismissed after a bankruptcy judge conducts a hearing to determine whether there is a good reason for the dismissal. The court will likely permit a dismissal of your Chapter 7 case if you can show good cause for the dismissal and another way to pay back some of your creditors.
Good cause probably will not be found if you simply changed your mind because you suddenly realized you do not want to give up property that is going to be sold. The trustee and creditors will likely present a strong opposition to a motion to dismiss made on these grounds. Instead, you would need to show some change of circumstance or substantive reason that outweighed any prejudice to creditors. For example, if you suffered a serious medical emergency and incurred an enormous amount of debt to a hospital after you filed, none of which could be discharged in the bankruptcy underway, your inability to get the fresh start promised by bankruptcy due to the hospital debt would likely be seen as good cause.
You can obtain a dismissal of your Chapter 13 case more easily, but you will lose the benefit of an automatic stay, and interest and penalties that were suspended during your bankruptcy may be tacked back onto the debt you owe. Under Section 109 of the Bankruptcy Code, debtors who voluntarily dismiss their bankruptcies subsequent to a creditor filing a motion for relief from an automatic stay are unable to file for bankruptcy again for a 180-day period.
At Grainger Legal Services, we understand how a court is likely to view your case and can help you try to withdraw from bankruptcy if you choose to do so. Alabama bankruptcy lawyer Charles Grainger provides knowledgeable and experienced legal representation from offices in Troy, Prattville, and Montgomery. Call us at (334) 260-0500 or contact us online to schedule a free consultation with a debt relief attorney.