Many people seek debt relief through bankruptcy, which can provide more protection against asset liquidation than other forms of debt settlement. Bankruptcy can stop collection calls, wage garnishments and foreclosure proceedings.
Generally, a person filing for bankruptcy can benefit in many ways. However, many people are concerned about what happens during and after the bankruptcy process. If the case is discharged, the person is left with a clean slate to begin rebuilding their financial futures; but if the case is dismissed, they may face more challenges than before the bankruptcy was filed.
What About My House?
In many cases, people that enter bankruptcy protection have already had the foreclosure process initiated on their property. Once a foreclosure is already underway, stopping the proceedings are often difficult. If a person has filed for bankruptcy, and their case was dismissed, the home will no longer be protected from foreclosure. In a sense, the fate of the home will return to its pre-bankruptcy status.
After a dismissal, the lender is free to resume the foreclosure proceedings and collection efforts on the home as they deem necessary. However, not all hope is lost; the lender may still be willing to negotiate with the borrower in efforts to keep the home out of foreclosure. Lenders are also put at risk through foreclosure, as they stand to lose more money than if they approve a modification to the mortgage or a repayment plan. There are only two ways to keep a house out of foreclosure after a dismissal (1) negotiate a repayment plan with the lender directly or (2) re-file for bankruptcy and hope to have the case discharged.
What About My Credit?
In general, the bulk of damage done to a person's has been done long before they filed for bankruptcy. Having a delinquent credit account with unpaid debts is the fastest way to ruin a credit standing. In many cases, bankruptcy can provide a clean slate from delinquent account statuses and allow for a debtor to begin rebuilding their credit right away. When debts are discharged, the debtor is relieved of liability for the debts and their accounts are essentially marked as current, or non-delinquent.
If a case is dismissed, the credit standing will continue to suffer the effects of being marked as delinquent. Like mortgage lenders, many creditors are often willing to negotiate repayment plans with borrowers outside of bankruptcy. Similar to preventing foreclosure, the only way to protect your credit after a dismissal is to (1) negotiate a repayment plan with the creditor directly or (2) re-file for bankruptcy protection.
Moving Forward After Dismissal
Depending on the reason for the dismissal many people will be able to re-file their case immediately after a dismissal. If a case was dismissed due to failure to complete the necessary paperwork, debtor education course requirement or pay court fees, the court may grant permission to file again as soon as the steps are completed. However, if the court dismissed a case due to withholding information, concealing assets or suspected fraud, the debtor may be required to wait 180 days or more before filing again.
Anyone considering filing a second time should consult a professional bankruptcy attorney. An attorney is best able to advise whether the case is likely to be accepted a second time or whether filing for Chapter 13, rather than a second attempt at obtaining a Chapter 7 discharge, would be best.
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