You may know how a New York bankruptcy case begins. (Your lawyer e-files your case with the court.) But what’s the event that signals the end of a bankruptcy case?
There are actually several ways a bankruptcy case can end.
- Discharge: For Chapter 7 or Chapter 13 bankruptcy, discharge is the most common outcome. And of course it’s the goal of most bankruptcy filers. If the court grants your discharge, then it means you have been relieved from some or all of your debt obligations going forward and creditors are no longer allowed to try and collect on those debts.
- Dismissal: A dismissal is an action the bankruptcy judge takes to end the case because there’s something wrong with the case either substantively or procedurally. Dismissals are usually for failure to file schedules, do the required credit counseling, or appear at the 341 meeting. In a chapter 13 bankruptcy the trustee might move for dismissal if the debtor fails to make payments. Dismissals occur much less frequently than discharges, but they do happen.
- It’s worth noting that fraud does not lead to dismissal but typically results in denial of discharge. This is an important distinction because if your discharge is denied and you file again in the future, you cannot discharge the debts that were listed in the prior case.
- Voluntary Dismissal: This is when the debtor decides to terminate his or her own case for one reason or another. A debtor has the absolute right to voluntarily dismiss a chapter 13, but not a chapter 7. Courts will rarely dismiss a 7 after assets have been discovered. There is also dismissal under 7 for abuse, usually too much income to file a 7. A common scenario in a chapter 13 bankruptcy might be where a debtor gets laid off and loses their salary in the middle of the 3 to 5 year repayment plan. If the debtor can no longer make payments as part of their repayment plan, then they might voluntarily dismiss their case.
- Conversion: A conversion refers to shifting from, e.g., Chapter 13 to Chapter 7. If you start out filing Chapter 13 and then realize you can’t make the payments at some point along the way, you might ask the judge to convert your case to a Chapter 7 bankruptcy. The conversion, if granted, marks the end of the Chapter 13 process for the debtor, though the case continues. This distinction is important because with a few exceptions, assets are determined as of the original filing date.
- Closure of Case without Discharge: This happens if you fail to file the debtor education certificate obtained by taking the required post-discharge debtor education course.