If you don't make your Chapter 13 bankruptcy monthly plan payments, the bankruptcy trustee will ask the court to dismiss your case. If the court does dismisses your Chapter 13 bankruptcy for nonpayment, you may be able to appeal the dismissal to a higher court. However, in most cases you can work something out before the case is dismissed, or refile a new case after dismissal.
Below you can learn about your options if you cannot make your plan payments, what to do if the trustee files a motion to dismiss your case, and if, in the rare instance, your case is dismissed with prejudice, how to appeal the dismissal.
For more information on how the Chapter 13 repayment plan works, see our topic area on The Chapter 13 Repayment Plan.
What Happens If You Don’t Make Your Chapter 13 Plan Payments?
If you want to continue with your Chapter 13 bankruptcy, you must make timely plan payments to the bankruptcy trustee every month. The trustee keeps a record of all payments you make during your bankruptcy. If you fail to make your plan payments, the trustee will file a motion with the court to dismiss your case.
What If the Trustee Files a Motion to Dismiss Your Case
When the trustee files the motion to dismiss, you will have a chance to review and oppose it. If you don’t oppose the trustee’s motion, the court will dismiss your bankruptcy without a discharge of your debts. But if you just had a temporary setback and want to continue with your bankruptcy, you can oppose the trustee’s motion.
The specific procedures for opposing a motion to dismiss will depend on the rules in your jurisdiction. But in general, when you oppose the trustee’s motion to dismiss, you must show the court that you can afford your plan payments and explain why your case should not be dismissed.
In most cases, if you have a valid reason that caused you to temporarily fall behind on your payments, the court or the trustee will work with you and allow you time to catch up on your missed payments. But if the court believes that you can’t afford to continue with your Chapter 13 plan, it will dismiss your bankruptcy.
Options If You Can’t Afford Your Chapter 13 Plan Payments
If you can’t afford to make your monthly Chapter 13 plan payments, you may have other options available to you including:
- modifying your plan to reduce your payment amount
- requesting a hardship discharge, or
- converting to Chapter 7 bankruptcy.
To learn more about your options, see When You Can’t Make Your Chapter 13 Payments.
Dismissal With and Without Prejudice
If the court dismisses your Chapter 13 bankruptcy, it can do so with or without prejudice. Most cases are dismissed without prejudice – meaning that you can file another bankruptcy case right away.
But if you acted in bad faith or otherwise abused the bankruptcy process, the court may dismiss your case with prejudice. If the court dismisses your bankruptcy with prejudice, you may not be able to file another bankruptcy for a specified amount of time or discharge the debts included in your first filing (the exact terms of the dismissal will depend on the court’s order).
For more detailed information, see What Does Dismissed With Prejudice Mean? and When Your Bankruptcy Case Is Dismissed Without Prejudice.
How to Appeal Dismissal of Your Chapter 13 Bankruptcy
As we discussed, the court or the trustee will typically work with you to resolve a motion to dismiss. Further, if your bankruptcy is dismissed without prejudice, you can refile your case immediately. As a result, appealing a Chapter 13 bankruptcy dismissal is not a very common occurrence.
If you wish to appeal your dismissal, you must file a notice of appeal within 14 days after your case is dismissed (but you can also file a motion for an extension of time). In addition, you will need to file other formal paperwork (such as a legal brief) with the court explaining why the court should grant the appeal and appear at a hearing to present oral arguments.
In most cases, you will have to show that the court made a mistake or have a very compelling reason to overturn the dismissal. Because appealing a Chapter 13 bankruptcy dismissal can be very complex, you will typically need an attorney to guide you through the process.