If you fail to make your Chapter 13 plan payments, eventually your bankruptcy case will be dismissed. You can refile another Chapter 13 petition, but you'll face some limitations on the protection of the automatic stay if you do so within one year of the dismissal. Get an overview of Chapter 13 bankruptcy and how it works.
What Happens When Your Chapter 13 Case Is Dismissed?
If your Chapter 13 case is dismissed for nonpayment of plan payments, the automatic stay is lifted and creditors may resume collection activities against you. You will again owe the full amounts of your debts, and creditors can bring actions to attach wages and property. If your plan included mortgage or car arrears, you may face foreclosure or the loss of your vehicle. Learn more about the Chapter 13 repayment plan.
Can You Avoid Dismissal?
If you believe that your original Chapter 13 plan will succeed, it's often best to avoid the need to refile your Chapter 13 case by making a motion to reinstate you case. You have to file the motion to reinstate before the trustee actually closes the case. In order to succeed in getting the reinstatement, you must demonstrate your ability to bring your payments current.
You have other options if you can't make plan payments. Read about them in When You Can't Make Your Chapter 13 Payments.
Refiling After the Trustee Dismisses Your Case
If your case is dismissed, you can refile your Chapter 13 case. Essentially, this means you are starting anew. You must prepare a new petition, schedules, and plan based on your current situation. A new filing fee will be due also. You must take credit counseling again if it has been more than 180 days you completed it the first time.
Limitations on the Automatic Stay When You Refile
When it comes to the automatic stay, there is a major difference between an original filing and a refiling. If you refile your case within one year of your first case's dismissal, the automatic stay protecting you from actions by your creditors will last only 30 days. You can get this time period extended if you make a motion and have a hearing in which you demonstrate that your second filing is in good faith. Learn more about the automatic stay.
This extra requirement can be costly and time consuming. At the hearing on the motion, the burden will be on you to demonstrate that your second filing was made in good faith. In order to prove good faith, you will need to show that there has been a substantial change in your financial or personal affairs, or some other reason to explain why you couldn't complete your previous plan.
If you don't think you can meet the good faith requirement, it may be to your advantage to hold off filing another Chapter 13 case until one year after the first dismissal.