If the Trustee Wants to Take My Property, Can I Dismiss My Bankruptcy Case?

You don't have an automatic right to dismiss your bankruptcy case, especially if it will negatively affect your creditors. Learn more.

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Once you file for Chapter 7 bankruptcy, you don’t have an automatic right to voluntarily dismiss your case. In fact, if dismissal of your case will prejudice (negatively affect) your creditors, the court will typically deny your request. Read on to learn more about whether you can dismiss your bankruptcy case if the bankruptcy trustee wants to take your property.

For more information on what happens if your case is dismissed, see When a Bankruptcy Case Is Dismissed.

What Happens to Your Property in Chapter 7 Bankruptcy?

The moment you file for Chapter 7 bankruptcy, almost all of your assets become property of your bankruptcy estate. The court appoints a bankruptcy trustee to oversee and administer your case. The primary responsibility of the trustee is to determine whether or not you have any property that should be sold to pay back your creditors.

Fortunately, you don’t have to give up all of your property if you file for bankruptcy. Bankruptcy exemptions allow debtors to retain a certain amount of property in Chapter 7 bankruptcy. If you can exempt the amount of equity you have in an asset, the trustee can’t take it from you. But the trustee has the power to sell your nonexempt assets to pay back your debts.

To learn more about how your property is treated in Chapter 7 bankruptcy, see our topic area on Your Property in Chapter 7 Bankruptcy.

Can You Voluntarily Dismiss Your Chapter 7 Bankruptcy?

The bankruptcy court might dismiss your case for a variety of reasons such as failure to file the correct paperwork, disobeying court orders, and not attending your meeting of creditors. But if you want to voluntarily dismiss your Chapter 7 bankruptcy, you must give the court a valid reason.

To dismiss a Chapter 7 bankruptcy, you typically have to file a motion with the court and go to a hearing in front of the judge. In most cases, if dismissing your case will negatively affect your creditors, the court will not allow you to voluntarily dismiss your bankruptcy. If the trustee wants to take your property, it means that you have nonexempt assets that can be used to pay back your creditors. In that case, you will generally have to show the court that you have a compelling reason to dismiss your case (other than the loss of your property) and that you can satisfy your creditors outside of bankruptcy.

How to Keep Your Nonexempt Property If You Can’t Dismiss Your Case

If the court doesn’t allow you to dismiss your Chapter 7 bankruptcy, you may still be able to keep your nonexempt property. Here’s how.

The Court Might Allow You to Convert to Chapter 13 Bankruptcy

If you can show the court that you can afford to pay back a portion of your debts through a Chapter 13 repayment plan, the court might allow you to convert your case. In Chapter 13 bankruptcy, you can keep your nonexempt property in exchange for making monthly plan payments that will be distributed to your creditors.

For more information on how Chapter 13 bankruptcy works, see our Chapter 13 Bankruptcy topic.

You Might Be Able to Buy the Property Back from the Trustee

Even if the Chapter 7 trustee is entitled to take your property, you might still be able to buy it back from the trustee. There are costs associated with storing and selling an asset in Chapter 7 bankruptcy. In most cases, to avoid having to pay a third party to conduct a public auction, the trustee would rather sell the property back to you. This means that you may be able to negotiate a fair price to buy back your property from the trustee.

by: , Attorney

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