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Chapter 13 dismissal can lead to collection calls restarting and debt collectors pounding on your phones. For example, a Chapter 13 dismissal will show on your public record. While you may receive a refund, you should consider thinking about your Chapter 13 dismissal options to make the most informed decision to get out of debt.

There are many valid reasons why you can’t complete your Chapter 13 bankruptcy case, especially if you recently became unemployed. Common issues include payments that are too high, unemployment, illness, or financial hardship. Sadly, there are consequences for not completing a Chapter 13 plan. This article discusses those consequences, your next options, and whether you can get a Chapter 13 dismissal refund.

1) How Does a Chapter 13 Dismissal Refund Work?

A Chapter 13 trustee can hold any money that remains undistributed to creditors. This money returns to the debtor after a Chapter 13 dismissal. Have you not received your refund? See your options below.

The Chapter 13 trustee must file a detailed accounting with the court before returning any money to the debtor. The court allows the Chapter 13 trustee to first deduct any administrative fees before returning the funds. It could take several weeks or months to receive a Chapter 13 refund after dismissal. 

Also, your bankruptcy attorney may make a claim on those funds for unpaid professional fees. In some cases, the refund could also be subject to a wage garnishment order or an IRS levy. This is because the bankruptcy automatic stay is no longer in effect after a dismissal. Without the stay, creditors can start taking action to collect their debt again.

2) You Need to Understand Your Chapter 13 Dismissal Options

As debt collectors may be able to see in the public records when a Chapter 13 is dismissed, you should consider understanding your options after Chapter 13 dismissal.

You have several options for debt relief after a Chapter 13 dismissal. You can re-file under Chapter 7 or Chapter 13. However, depending on the reason for the dismissal, the automatic stay may not go into effect without filing an additional motion with the court. There could also be a penalty period before the automatic stay becomes effective. During this time, creditors could continue to pursue actions to collect debts. Also, the dismissal of a Chapter 13 case with prejudice may result in a mandatory waiting period to re-file bankruptcy. 

Regardless, we built the following debt relief options calculator to help you compare your different options once your Chapter 13 has been dismissed. The most common may be debt settlement or converting to a Chapter 7 before a dismissal. The Debt Relief Options calculator uses bankruptcy forms to estimate whether you would qualify for a Chapter 7. We provided some additional information below the calculator for you to review.

Converting to Chapter 7 Before a Chapter 13 Dismissal

You might have the option to convert to Chapter 7 before the dismissal of your Chapter 13 case. Converting to Chapter 7 can erase debts quickly. However, some risks exist with converting to Chapter 7. 

Assets with equity could be at risk of being sold by the Chapter 7 trustee unless a bankruptcy exemption protects the equity. In some cases, it might be worth losing an asset to get rid of debts quickly in Chapter 7. However, you should carefully analyze your risk of losing property before converting to Chapter 7. You can get more information about the Chapter 7 bankruptcy process in our Chapter 7 overview.

3) What are Common Reasons for a Chapter 13 Dismissal?

A Chapter 13 plan is typically a 60-month commitment. Some individuals may qualify for a 36-month bankruptcy plan. In either case, three to five years is a long time to be in bankruptcy. Many things can happen during that time. Some common reasons for Chapter 13 case dismissals include:

  • Voluntary dismissal — A Chapter 13 case is a voluntary repayment plan. A debtor (the person who files for bankruptcy relief) can quit Chapter 13 at any time.
  • Missed Chapter 13 payments — If you miss your Chapter 13 payments, the courts will dismiss your case. However, most bankruptcy attorneys calculate Chapter 13 plans with a little bit of room that allows for a suspension of payments for three months in case of a hardship. The Chapter 13 trustee and the bankruptcy judge examine the reason for the request very carefully before granting a 3-month deferral of Chapter 13 payments.
  • Failing to attend hearings — If you do not attend your 341 First Meeting of Creditors hearing or any other Chapter 13 hearing, the court may dismiss the case.
  • Failure to complete bankruptcy courses — You must complete two bankruptcy courses as part of your bankruptcy case — the Credit Counseling Course and the Debtor Education Course. 
  • Failing to file required tax returns — Debtors must file all required income tax returns or other tax returns as scheduled.
  • Failure to file all bankruptcy forms — You must complete and file your bankruptcy forms. Failing to file any required form could result in a dismissal of the Chapter 13 case.
  • Failure to submit required documents to the Chapter 13 trustee — The Chapter 13 trustee may require certain documents. Failing to submit the documents could result in dismissal. 
  • Meeting deadlines — There are numerous deadlines in a Chapter 13 case. Failing to meet any deadline set by the court or by the Bankruptcy Code could result in a Chapter 13 dismissal.

4) What is the Consequence of a Chapter 13 Dismissal?

When a Chapter 13 case is dismissed, your debts are not discharged or forgiven. In other words, you owe all the debts you did when you entered bankruptcy. 

Your creditors must give you credit for any payments they received from the Chapter 13 trustee. However, your creditors can begin collection efforts as soon as your bankruptcy case is dismissed. Collection efforts can include: calling you, sending you letters, filing debt collection lawsuits, wage garnishments, repossessions, and foreclosures. 

Get Help Deciding Between Debt Relief Options

When a Chapter 13 bankruptcy is dismissed, your creditors may start to contact you to collect the debt that was previously due. Take the Chapter 13 dismissal options calculator below to understand your options, estimate costs, and compare the pros and cons to make the most informed decision.

Post Author: Ben Tejes

Ben Tejes is a co-founder and CEO of Ascend Finance. Before Ascend, Ben held various executive roles at personal finance companies. Ben specializes in Chapter 13 Bankruptcy, Debt Settlement, Chapter 7 Bankruptcy and debt payoff methods. In his free time, Ben enjoys spending time going on adventures with his wife and three young daughters.

35 Replies to “Chapter 13 Dismissal Refund and Your Options”

  1. Hello..My chapter 13 was dismissed….In my current situation, rather thn re-filing, i may be able to pay the debts that I owe. My question is, when the creditors start to send me my bills again, will the balance be when i entered bankrupcy 8 months ago or will it add late charges for the past 8 months. Thanks

    1. My Name Barbara Smith Greer I file Chapter 13 and I was almost finished with it I had hard times I got very ill and I couldn’t work I apply for my early retirement and I got approved so u sent them $3,000 and I owed them $2,000 so I sent them $700.00 on it and they send me my dismissal papers and 2 weeks the pull my truck and I owe lesser than a $1000.00 and I still had a mother year to pay now the creditors are after me will I get a refund on some of my money that they didn’t pay the creditors

      1. Hey Barbara, I am really sorry to hear that happened. I believe if all creditors have received their final payment and your case is complete, you may receive a refund upon approval by the Trustee. That said, these may be processed once per month and the refunds I believe are automated. Have you received a refund?

  2. I paid for I think 3 years directly out of my pay. I was dismissed by trustee because of tax documents not received. I called snd explain my mom was dying. They gave me 2 weeks. I work in a factory, didnt have a computer, didnt meet the 2 weeks. What happened to all that money? Chapter 13 to save my house and they csme after me immediately. It has caused more hardships than ever. Am i allowed a refund. Its o ly been 3 years since dismissed but 6 years since i filed

    1. Oh my goodness, I am so sorry to hear this Maryanne. 3 years and only to have it dismissed because tax documents were not received. Have you been taken care of now? If you want to chat, feel free to take our Debt Options calculator which is specifically designed to help you sort of understand your options in dismissal. https://tryascend.com/qualify/calculator/quick – I can look out for your results to discuss your options together.

  3. Hello…I was 58 months of 60 into my bankruptcy in February 2021. I received a letter a few days ago stating that my bankruptcy was dismissed on February 19, 2021. I checked my account status and it shows that there is $40 on hand…I just sent my payment of $152 the end of February 2021. What happens to the payment that I just sent and the money that’s said to be on hand in my account?

    1. Hey Valerie, oh my goodness, I am so sorry – 58 months from 60 months? I believe often the refunds are generated automatically if they are due. Have you received it yet? Again, I’m really sorry to hear this.

  4. Hello My name is loretta my husband and I was dismissed on a chapter 13 and we are divorcing he couldn’t make they payments because it was to much with our other bills we paid over half of it off and I’m on disability and I have all these bills being by myself I just can’t pay it but they say I have to much equity I own my own home and that’s even behind so I am don’t know what to do

    1. Hey Loretta, ah, this is a really challenging situation with the disability and taking over half of your income. Let’s chat about options – If you can take our free debt options calculator – https://tryascend.com/qualify/calculator/quick, that will give me a sense of your data, which can be helpful to discuss all your different options on the phone.

  5. How do I dismiss my bankruptcy chapter 13 . I can pay my creditors now abs save money since all is paid down and the rate I am paying is high in bankruptcy

    1. Hey Kristi, I believe non-payment may have the Chapter 13 trustee file a motion to dismiss the case. Have you stopped paying on your Chapter 13 bankruptcy?

  6. I want to end Chapter 13 and filed due to student loans over $187,000. However, I did have credit cards abt $10,000 that were current.I pay $500 per month for bankruptcy. Each year Trustee take 1/2 of my tax refund and two car settlements they took the majority. I feel ripped-off. Before bankruptcy creditors never bothered me. Prior to my filing Chapter 13 my car balance was $13,450 but being in bankruptcy it shows I paid $8573 of $15600. How did the balance owed for my car increase. I started bankruptcy in April 2018. What should I do?

    1. Hey Lisa, oh, I am sorry about your experience. I’d like to hear more about the Chapter 13 care balance. Do you have a few minutes to catch up? I also sent an email to the email you provided from my email address.

  7. I am trying to sell my house and thinking of dismissing my Chapter 13 and will pay all credit cards off with the proceeds from the sale of my house.
    Since I do not have 4 – 6 weeks to wait on the court to give me the ok on and offer. Plus I am having a very hard time securing a rental due to my bankruptcy and I needs a clearance letter.
    Is this a smart way to go?

  8. Hi,
    I’ve recently been discharged from a ch 13 that was filed in 2017. I have some tax debt that is priority and must be paid, however, with the older debts being from 2014/2015 and before, will they be able to still come
    After me?

  9. I filled chap13 in 2019. It was dismissed because my attorney failed to file my schedule on time. I filed chap13 again 2020. To date my chap13 has not been confirmed. During that time I sold my house and voluntarily turned I’m my 2 car. All of the proceeds went to the trustee in the amount of $48,000 that is being held. I have 1 car that I am paying on and the rest is unsecured debt and federal taxes owed, student loan. I missed 2 planned payments to have my chap13 dismissed. I plan to take the money and pay off my debt. Which debt should be paid first?

  10. I filled chap13 in 2019. It was dismissed because my attorney failed to file my schedule on time. I filed chap13 again 2020. To date my chap13 has not been confirmed. During that time I sold my house and voluntarily turned I’m my 2 car. All of the proceeds went to the trustee in the amount of $48,000 that is being held. I have 1 car that I am paying on and the rest is unsecured debt and federal taxes owed, student loan. I missed 2 planned payments to have my chap13 dismissed. I plan to take the money and pay off my debt. Which debt should be paid first? Can the trustee take the money and pay IRS? How much of the money will the trustee take? How long will it take to return funds not paid out? How long do a dismissal stay on your credit report?

  11. Hi I was in a chapter 13 for few years, I paid for over three years and laid my case was dismissed I can no longer find a lawyer that I’ve been paying and how can I get my money back after being so much for so long?

  12. I recently filed bankruptcy. My reason for filing was my car was repossessed due to a title loan and I simply wanted to save the car before they auction it off. I’m extremely behind on bills due to not being able to get to work. I recently received my personal injury settlement check and was told I have to turn over every dime. I’m in no position to do that. I spent some of it paying bills and the rest is enough to redeem the car. What should I do? Is a dismissal the best way? I was told I still have to turn it over even if a dismissal is granted. How can this be a fresh start when they literally take everything?

  13. Current bankruptcy balance is $1,400.00. Bankruptcy chapter 13 is holding the remaining balance that’s owe to me of $7,895.00 and still taking out of my checks 171.50 weekly and only owe $234.00 remaining off the mortgage, why the trustee will not send me my check to purchase a new vehicle and never been behind in my payments

    1. Hey Kathy, this is certainly a challenging one. Have you contacted the trustee’s office why they haven’t sent a check? I believe the check is often automated.

  14. Chapter 13 was dismissed for non compliance meaning a payment got sent back and we have 4 kids, we had our 4th kid this year and we have been paying $629 a week not a month! That’s extremely hard and I was wondering since we filed in 2019 due to our home if I could just call the mortgage company and ask if we can just start making payments through them and of course our car loan that we pay someone else through. I don’t want to refile but has anyone ever did this before where they got dismissed by the court and just called their creditor to ask if they would take them back and make payments to them. I would hate to refile another 5 years and start over all because my husband lost his job of 14yrs and we had a baby. Thanks

    1. Hey Christy, so sorry to hear this. Have you been able to reach the mortgage company to ask whether yo can continue making payments? Please let me know.

  15. I filed Chapter 13 in 2020 to avoid foreclosure. Included in the filing of Chap13, 4 credit cards that came up to $5000 was included. I was approved for a loan modification and that past due mortgage balance will be removed from the Chap 13 amount. Can I request a dismissal of the Chap 13 and just pay the creditors on my own?

    1. Hey Marsh, it’s great to hear that you were approved for a loan modification. You should be able to contact your attorney to understand your options to dismiss your case. Non payment may be an option to dismiss your case. After your dismissal, you may be able to settle the accounts with your creditors directly.

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