Bankruptcy / Chapter 13 / Voluntary Chapter 13 Bankruptcy Dismissal

Pros and Cons of Voluntary Chapter 13 Bankruptcy Dismissal

Written by Ben Tejes
Updated Oct 11th, 2023
This article is for informational purposes only. Ascend does not provide legal advice, and are not attorneys. If you'd like to speak with a bankruptcy attorney that serves your city, you can speak with one in a free consultation.

Many people are considering Chapter 13 bankruptcy dismissal, but do not feel comfortable speaking with their bankruptcy attorney about it. We understand. We actually speak with many people in this bucket about Chapter 13 dismissal, Chapter 13 dismissal refund you may be entitled to, and options post Chapter 13 dismissal. While there are many reasons to research dismissal, it is important to understand the pros and cons. 

In this article, I will go through: 

  1. What is a Chapter 13 Bankruptcy Dismissal?
  2. Benefits of Voluntary Dismissal of Chapter 13 
  3. Downsides of Voluntary Dismissal of Chapter 13
  4. What Happens If You Voluntarily Dismiss Your Chapter 13 Bankruptcy?
  5. How Long Does It Take to Dismiss A Chapter 13 Bankruptcy Case?
  6. Creditors After Chapter 13 Dismissal 

You may be considering dismissal because your Chapter 13 plan payment is a bit too high. Or, you could research it because your income is increasing so much that your Chapter 13 monthly payment would become unreasonable. Wherever you are, it is important to understand what is attached to a voluntary Chapter 13 bankruptcy dismissal.

We specialize in helping people understand Chapter 13 dismissal, so if it's helpful to chat with us or text us, please fill out the information below. Ben, Jeffrey or I will reach out to answer your questions about Chapter 13 bankruptcy dismissal at no cost.

Also, if you prefer to watch this information, please check out my video below covering 3 things to know about Chapter 13 bankruptcy dismissal. 

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What is a Chapter 13 Bankruptcy Dismissal?

When it comes to filing a Chapter 13 bankruptcy, you have the right to leave the plan at any time. When you are choosing to leave the Chapter 13 payment plan, that would be considered a Voluntary Chapter 13 Dismissal. You may need to fill out the voluntary Chapter 13 dismissal forms and file a motion if you decide to go this route. There are benefits and setbacks to doing this, so it is important to understand those before making the decision to be dismissed. 

In addition, there is also something called a Chapter 13 Hardship Discharge, where you are able to discharge from your Chapter 13 bankruptcy early if there is an injury or illness preventing you from completing the rest of the payment plan. There are many ways for Chapter 13 bankruptcy to be dismissed, but here are some of the common reasons: 

  • Failure to make Chapter 13 Payments
  • Not filing tax returns every year or not submitting a copy to the trustee
  • Not meeting all requirements and deadlines

If you are looking into a Chapter 13 dismissal because your Chapter 13 monthly payment is too high, then it could be good to consider converting a Chapter 13 to Chapter 7 bankruptcy before dismissing. A Chapter 7 bankruptcy can be a far less expensive option and you are often discharged from a Chapter 7 bankruptcy within 120 days. Before making the decision to get dismissed from a Chapter 13, see whether you may qualify for a Chapter 7 bankruptcy. 

Qualifying for Chapter 7 Bankruptcy

When it comes to qualifying for a Chapter 7 bankruptcy, they will generally do a 6-month look back to gauge whether you may be eligible for the liquidation bankruptcy. Some of the factors considered on qualification are: 

  • Annual Household Gross Income 
  • Household Size
  • State of Residence
  • Monthly Disposable

When taking the Chapter 7 means test, there are two parts, the first part looking at your household annual gross income and the second part looking at your monthly disposable income. 

Converting to a Chapter 7 Bankruptcy

If you find that you may be able to qualify for a Chapter 7 bankruptcy, you may want to speak with your current representation about converting your Chapter 13 to a Chapter 7. However, there are things to consider before making this decision. You may not be able to protect your home in a Chapter 7, thus making it difficult to convert over. You can take a look at the state’s bankruptcy homestead exemption to see if you may be able to protect your home in a Chapter 7 bankruptcy. 

Benefits of Voluntary Dismissal of Chapter 13

While it may seem like there are only a few use cases where the pros of a voluntary Chapter 13 dismissal outweigh the cons, it is still good to consider what the pros are. Sometimes folks get an increase of income while in a Chapter 13 bankruptcy case, which can be great news but it’s also important to understand how that may affect the monthly Chapter 13 plan payment. 

Let’s say Julia has been in a Chapter 13 for a few months and now is expecting her income to increase, where her monthly income will go up by $1,000/mo. One of the pieces in a Chapter 13 bankruptcy is the debtor’s monthly disposable. If there is an increase of income of around $1,000/mo, that may be included in the monthly disposable and paid directly to the creditors. At this point, since Julia just started Chapter 13, it could be beneficial to consider dismissing the case and resolving the debt in a debt negotiation route. While this could be a cost-saving option for Julia, there are potential downsides to doing something like this, so it is important for her to consult with her representation before dismissing. 

Downsides of Voluntary Dismissal of Chapter 13

Some of the disadvantages to being dismissed from a Chapter 13 bankruptcy voluntarily can be quite serious, but sometimes being dismissed could be your best option. Here are some of the downsides to a voluntary Chapter 13 dismissal: 

  • Potential Risk of Losing Automatic Stay in a Future Bankruptcy Case
  • Interest and Penalties May Be Added to Your Debts (including during the period of time that you were in the Chapter 13 case)
  • Debts may not be discharged
  • Opportunities to credit can be greatly decreased
  • Waiting period before eligibility to file again

What Happens If You Voluntarily Dismiss Your Chapter 13 Bankruptcy? 

If you decide to go the route of dismissing your Chapter 13 case, it is important to understand what happens. When you initially dismiss from a Chapter 13 the protection from the Automatic Stay is released. At this point, the creditors and collection agencies may contact you again. 

Once you have been dismissed from the Chapter 13 case, your previous debt may still be owed. It may be reduced if you made payments to your unsecured debt in your Chapter 13 plan. Given the fact you would still need to address all of the unsecured debt still, it is important to understand the Chapter 13 dismissal refund and your options before taking the next steps. 

Common Options After a Voluntary Chapter 13 Dismissal

You may be at the point where dismissed from a Chapter 13 bankruptcy may seem like the best option. If that is the case, it’s important to understand what your options could look like. Take our free Chapter 13 dismissal debt options calculator below to get the cost, qualification, and pros and cons PERSONALIZED to your financial situation.

Here are some common options folks look into after dismissing from Chapter 13 bankruptcy: 

  • Debt Negotiation
  • Re-Filing Bankruptcy
  • Paying the Creditors Directly

What is Debt Negotiation?

Debt negotiation is the process of settling with your creditors. By settling debt, you reduce the total amount of debt you owe by often around 50%.  Generally, folks will either settle with the creditors themselves or work with a debt settlement company. 

Should I Work with a Debt Settlement Company? 

The question of working with a debt settlement company or not is a question that I get quite a bit. You may want to understand the following factors before working with a debt settlement company.

  • Number of creditors
  • Are there any pending lawsuits? 
  • Total amount owe
  • List of creditors you owe (some prefer to work directly with the consumer)

If you have a long list of creditors, it could be beneficial to employ a debt settlement company. These companies settle the debts for you for a fee. You can also save on fees by settling the debts you owe. That said, you may not have the same know-how of what to settle each account for. 

Will I Get Sued During a Debt Settlement Program? 

One downside of enrolling in a debt settlement program is that the potential of a lawsuit is still at risk. Some creditors rarely sue, while other creditors are notorious for suing. You can take our free lawsuit likelihood calculator to see the potential risk of a lawsuit during debt negotiation. 

Should I Refile Bankruptcy After A Chapter 13 Dismissal? 

Generally, if you are voluntarily dismissed from a Chapter 13 bankruptcy, re-filing bankruptcy is not the most common route. However, there are cases where a debtor’s income drops significantly after dismissing from a Chapter 13 case. When this happens, you may now qualify to file a Chapter 7 bankruptcy by passing the Chapter 7 means test. If that is the case, that may be an option to consider as it would discharge the unsecured debt. It would also provide you with an automatic stay against your creditors. 

How Long Does It Take to Dismiss A Chapter 13 Bankruptcy Case?

The question of how long it takes to dismiss a Chapter 13 bankruptcy case is a common question. There are many different ways to be dismissed from a Chapter 13 bankruptcy. For example, one route is just no longer making your payments in a Chapter 13 case. If you stop making payments to your Chapter 13 plan, the trustee may file a motion to dismiss the case.

The process of being dismissed from a Chapter 13 bankruptcy case generally doesn’t take very long. If possible, you can speak with your current representation about it.  They may be able to provide some insight on the time frame given your case. However, if you wanted to voluntarily dismiss a Chapter 13 case, you would stop making payments and then would respond to the trustee. The trustee would file a motion after the failure to make payments. After that, the debtor should be able to get dismissed from the bankruptcy.

Responding to a Motion to Dismiss a Chapter 13 Bankruptcy

If the debtor received a motion to dismiss the Chapter 13 case from the trustee, they have a couple of options. If the motion to dismiss based on the lack of payments is incorrect, the debtor can argue that the trustee is incorrect. On the other hand, if the debtor believes that they can make the payments and solve the issue, they can reach out with a plan of action going forward. 

Creditors After Chapter 13 Dismissal

One of the main reasons someone would steer clear of voluntarily being dismissed is because of garnishment or lawsuit. For example, the creditors will regain the ability to sue or garnish your wages. You can still resolve an account with creditors if there is a lawsuit pending. However, the amount of debt you would be able to reduce would most likely be lower.

How do Creditors know your Chapter 13 Bankruptcy Has Been Dismissed?

When you file a bankruptcy, you are asked to present the list of all of your creditors so that the court can notify the creditors of your bankruptcy filing. A common way creditors are notified about a bankruptcy filing is through a letter sent by the clerk from the bankruptcy court. If you let your Chapter 13 be dismissed, the bankruptcy may notify your creditors about the bankruptcy dismissal. 

Do Creditors Start Collecting Immediately?

Once creditors and collectors have been notified regarding the Chapter 13 bankruptcy, there is a good chance that they may start trying to collect immediately. If you start receiving numerous calls from creditors, it may be a good idea to start looking at options to find relief from the debt, as they may have a chance to sue. 

If the reason for dismissing from Chapter 13 was because of a large increase in income, then you may be able to start paying on the debts again or pay them in full to stop the creditor from collecting. However, it is important to note that there may be a collection of fees during the time in Chapter 13  bankruptcy which may make the debt hard to tackle. 


Choosing to dismiss a Chapter 13 bankruptcy case can be a big decision given the potential risk involved. However, after careful consideration and thought, it may be the best option for you. If you have any remaining questions after reading this article, feel free to reach out to us at or speak with your current representation about dismissing your Chapter 13 bankruptcy case.