Dismissed with Prejudice and the Prejudice Period
In bankruptcy, the “prejudice period” refers to the time that you are prohibited from refiling for bankruptcy after your case has been dismissed. Sometimes, the term used is also dismissed with prejudice. This can happen for numerous reasons, and how to deal with it depends on the specific facts of your case.
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Chapter 7 Bankruptcy and the Prejudice Period
For Chapter 7 bankruptcy, if a case is dismissed with prejudice, the court imposes a specific period during which you cannot refile. This is known as the “prejudice period,” and it lasts for 180 days or six months.
The reasons your case can be dismissed vary. For example, some bankruptcy trustees automatically seek the dismissal of a case if the debtor fails to appear at the 341 meeting of creditors. Another example is the case that gets dismissed because documents were not provided on time. Note that when represented by an attorney, most attorneys will be able to obtain an extension or reschedule the date of the creditors’ meeting.
- Will Your Creditors Be Present at the 341 Meeting of Creditors?
- What to Do if You Forget to Add Creditors to Your Bankruptcy Petition?
If your case is dismissed, it is possible to “shorten” the prejudice period, which is another way of saying to set aside the dismissal so the case can move forward. However, the reasons why the case was dismissed and the facts of the case will determine if the court grants the motion to shorten the prejudice period, since it’s not automatic.
For example, I’ve had situations where the client’s car breaks down or the client is hospitalized. Assuming I wasn’t able to get an extension or have the bankruptcy hearing rescheduled by the bankruptcy trustee, that’s likely a situation where the judge will set aside the dismissal. The evidence of either one would be easy to provide to the court. But let’s add facts to this situation.
If a debtor is facing eviction or foreclosure, the filing of bankruptcy can halt lawsuits due to the automatic stay. However, Chapter 7 bankruptcy does not allow a debtor to retain their home if they are behind on mortgage payments. The same rule applies to car repossessions. Therefore, failing to appear at the 341 meeting based on these circumstances could result in the judge denying the request to shorten the prejudice period since issues of bad faith come into play.
If you have a bankruptcy attorney, filing a motion to set aside the dismissal may increase your attorney’s fees. Check your retainer agreement for details on included services.
The Dismissal in Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, the prejudice period of 180 days is also the same, but I would say that having cases dismissed in Chapter 13 is more common when compared to Chapter 7. It’s also more likely that the bankruptcy judge shortens the prejudice period.
Chapter 13 cases are often dismissed for not keeping up with payments. The standing trustee will move to dismiss if payments are missed, but typically, there’s no benefit to having a Chapter 13 case dismissed.
For one, this costs more money because the bankruptcy lawyer will charge additional fees to file the motion. Also, with Chapter 13, since you are paying back your debt or at least a percentage of it, maybe even catching up on arrears with your car or mortgage payment, there’s no advantage in risking losing your assets. Without the protection of the automatic stay, creditors can proceed with foreclosure or car repossession, so there’s no benefit to having their case dismissed.
With Chapter 13, you must have funds available to keep the plan current when filing a motion to shorten the prejudice period. For instance, if you missed two months of payments and the case was dismissed, you must show proof that you can cover the payments for those two months and the current month before the judge will grant the motion.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.
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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.
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