As a bankruptcy attorney, I have often been asked if a Chapter 7 bankruptcy can be dismissed after filing if the client changes his or her mind and decides not to go through with the case. The best answer is maybe, but not likely. Chapter 7 is the liquidation chapter of the Bankruptcy Code. As a result, the Chapter 7 Trustee’s job is to determine if the debtor in a Chapter 7 has any assets available for liquidation. Where a Chapter 7 debtor desires to dismiss the bankruptcy case after filing because the Chapter 7 Trustee is trying to sell an asset the debtor does not want to lose, a motion to dismiss the Chapter 7 petition by the debtor would most likely be hotly contested by the Trustee or creditors in the case that could anticipate being paid on their claims from the proceeds of the sale.
Section 707 of the Bankruptcy Code provides that a Chapter 7 case may only be dismissed after a hearing on the issue is conducted by the bankruptcy judge assigned to the case. The Court can only dismiss for cause – that means there must be a compelling reason for the dismissal and simply changing one’s mind would likely not be enough to constitute cause for the bankruptcy judge. However, if the debtor owned no assets available for liquidation in the Chapter 7 and presented the court with a good reason, dismissal could well be granted by the bankruptcy judge.
I had a recent example of this in a Chapter 7 that I filed for a married couple. The wife had uncontrollable seizures that required hospitalization after the filing of the Chapter 7 bankruptcy petition. The husband has been laid off from his employment right before the petition was filed and, as a result, lost medical insurance coverage for the family. This resulted in a $40,000.00 hospital bill that was post-petition and therefore not eligible to be discharged in the Chapter 7 (debt incurred after the filing of a bankruptcy petition is generally not included in the case or available to be discharged).
Motion to Dismiss
I filed a motion to dismiss my clients’ case because the $40,000.00 hospital debt would have completely thwarted my clients’ ability to obtain a fresh start after the Chapter 7 discharge. The motion to dismiss was granted by the bankruptcy judge because the reason for the dismissal request was sufficient if not compelling and the clients had no assets available for liquidation. The Trustee therefore did not object, nor any creditor in the case.
It is important when considering filing for bankruptcy relief to ask these type of questions of your bankruptcy attorney if you have concerns about these type of issues. No question is ever a bad question to ask. If you are concerned about it, it’s important to make your bankruptcy attorney aware of it. Your bankruptcy attorney is there to advise you, including whether or not a petition should be filed given your particular concerns or circumstances. If you are considering a bankruptcy option and need assistance please contact one of our locations nearest you for a free, confidential consultation with one of our experienced, licensed attorneys.