What effects does a dismissal have on a bankruptcy case? Explain the difference between a voluntary dismissal and an involuntary dismissal

Question

What will be an ideal response?

Answer 1

A bankruptcy dismissal occurs when the bankruptcy court ceases administration of the case and no longer has jurisdiction over the matter, including any adversary proceedings that other parties have filed. In simple terms, a dismissal means that the debtor's case has been thrown out of court. The debtor's obligations are not discharged, the Automatic Stay terminates, and creditors are now free to pursue any legal collection efforts. A debtor, creditor, trustee, or other party in interest may seek a dismissal.

In a voluntary dismissal, the debtor decides not to pursue the bankruptcy case and consents to its dismissal. The debtor may want to dismiss the case voluntarily when he or she finds new employment and now can pay creditors, reaches a settlement with creditors, or finds that the court has determined that some or all of the obligations are not dischargeable.

An involuntary dismissal is typically initiated when the debtor has failed to comply with the requirements of the Bankruptcy Code or Federal Rules of Bankruptcy Procedure. Some examples of noncompliance issues that the debtor can get into are failing to:

• Attend the 341 hearing.
• File a Chapter 11 plan in a timely fashion.
• File monthly financial statements (Chapter 11 cases).
• File tax returns over the previous four years.
• File the proper documents.
• Make payments under a repayment plan (Chapter 13 cases).
• Meet deadlines.
• Participate in the required credit counseling and debt management courses.
• Pay court fees or charges.