What Happens When a Bankruptcy Is Dismissed?

Basics

Not all bankruptcy cases are approved, though the federal court works as hard as possible to ensure a low number of dismissals. When a bankruptcy is dismissed, it means the case is over. Collection activity such as lawsuits and wage garnishments can start again, and the consumer has no legal protection against such activities because her bankruptcy case was rejected. However, there are ways to re-file a bankruptcy case, depending on why the original bankruptcy was dismissed.

Even a dismissed bankruptcy appears on your credit reports, which will still affect your ability to get credit. Filing bankruptcy in itself is considered a negative credit event, even if your case was ultimately rejected. If your case was dismissed due to a lack of documentation on your part, you may be able to immediately re-file the case. However, if your case was rejected due to a more serious problem, such as not claiming all of your debts or assets, you may have bigger problems than a dismissed bankruptcy case. Not claiming everything on your paperwork can be considered bankruptcy fraud, which is punishable by imprisonment and/or fines if you are convicted. If you might be accused of bankruptcy fraud, immediately consult with a lawyer.

In most basic dismissed cases, the federal bankruptcy court will not bar you from filing again. You may be able to pursue either Chapter 7 debt forgiveness or Chapter 13 debt restructuring as soon as the next day. However, in more serious cases you may not be allowed to file bankruptcy again for 6 months or longer, or barred from filing for Chapter 7. You can also appeal a dismissal, especially if the error was an oversight or an honest mistake. Ask the clerk of your local bankruptcy court if you have the option to appeal the dismissal of your case. If you do, you will have the advantage of having only the original bankruptcy on your credit record. Remember that if you file bankruptcy again in a separate case, you will have two bankruptcy filings on your credit reports. Chapter 7 cases, whether dismissed or not, remain on your credit file for 10 years. Successful and unsuccessful Chapter 13 filings stay on your reports for 7 years.