Why Bankruptcy Cases Get Dismissed: The Real Reasons Behind Chapter 7 & 13 Failures

Filing for bankruptcy provides debtors a “fresh start,” however, the path to discharge is not guaranteed. A bankruptcy case can be dismissed for various reasons. Understanding the common reasons why cases fail is essential for any debtor.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways: Why Bankruptcy Cases Get Dismissed

• Bankruptcy Requirements: Bankruptcy requires adherence to procedural rules and statutory requirements; otherwise, a case can be dismissed.
• The “For Cause” Standard: Bankruptcy judges have broad authority to dismiss cases “for cause.” This often includes failure to appear at the mandatory 341 Meeting of Creditors or failure to provide required financial disclosures, schedules, tax returns, and pay stubs.
• Statutory Requirements: A case can be dismissed if the debtor fails to meet specific requirements, such as failing the Chapter 7 “Means Test” or defaulting on required plan payments in a Chapter 13 case.
• The Consequences of Dismissal: A dismissal results in a six-month bar on refiling. During this time, the automatic stay is lost, leaving the debtor vulnerable to immediate creditor actions like foreclosure, wage garnishment, and repossession.

The Most Common Reasons Bankruptcy Cases Are Dismissed

In both Chapter 7 and Chapter 13 cases, dismissals occur, but they are rarely grounded in bad faith as defined under the Bankruptcy Code. Dismissals are usually based on the court’s authority to dismiss ‘for cause’ under 11 U.S.C. §707(a) and §1307(c).

Common reasons include:

Failure to Appear at the 341 Meeting: The Meeting of Creditors is a mandatory proceeding. Failure to appear, without a valid, pre-approved excuse, almost invariably leads to a trustee’s motion to dismiss.

Non-Compliance with 11 U.S.C. §521: Debtors are required to provide specific financial documents, including schedules, a statement of financial affairs, recent pay stubs, and tax returns. Failure to provide these to the trustee in a timely manner, typically 7-10 days before the creditor’s meeting, is a frequent ground for dismissal.

Professor’s Note: If the trustee agrees to reschedule the 341 meeting of creditors, your bankruptcy attorney is likely to charge additional fees, especially if they were present, so it’s to your financial advantage to provide those documents immediately.

Credit Counseling Requirements: Failure to complete the mandatory credit counseling course before filing or the debtor education certificate post-petition will result in a dismissal.

Statutory Requirements

A bankruptcy case could also be dismissed for failing to meet the statutory requirements for Chapter 7 and 13. For Chapter 13, failure to make timely plan payments is the most common reason for dismissal in reorganization cases.

In Chapter 7, if a debtor fails the “Means Test,” whether their income is too high or they have sufficient disposable income, the case may be dismissed or converted to a Chapter 13.

Under 11 U.S.C. §109, a debtor may also be ineligible to file if they have had a prior case dismissed within the preceding 180 days due to a willful failure to abide by court orders or appear before the court.

The Professor’s Conclusion

Dismissals are rarely the end of the road, but the protection of the automatic stay is lost, which allows creditors to proceed with collection efforts, wage garnishment, and foreclosure.

Ultimately, bankruptcy dismissals are less about misconduct and more about compliance with the procedural requirements of the Code. For most debtors, avoiding dismissal simply requires providing requested financial documents to the trustee promptly, honest disclosures, and steady communication with your bankruptcy attorney.

Educational Resources

• For Institutions: Colleges and universities can purchase or request examination copies of my textbook directly from Routledge Publishing.
• For Students & Practitioners: Single print and digital copies are available via Amazon Books.
• Video Lectures: Stream comprehensive legal breakdowns and video explanations on the Prof. Hernandez YouTube Channel.

Bankruptcy Court & Consumer Resources

Explore a deep dive for consumer guides and court directories to navigate your legal options:

• A step-by-step master guide on Filing for Bankruptcy and Navigating the Petition.
• Access full directories for the Federal Bankruptcy Court System and Trustee Contact Information.
• Protect your assets by reviewing your specific State Bankruptcy Exemptions or compare them against the Federal Bankruptcy Exemptions.
• Prepare for your court date with the updated brief on the 341 Meeting of Creditors Rules and Procedures.

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Bankruptcy Code Cited Sections

• 11 U.S. Code §707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13.
• 11 U.S. Code §1307 – Conversion or Dismissal.
• 11 U.S. Code §341 – Meetings of Creditors and Equity Security Holders.
• 11 U.S. Code §521 – Debtor’s Duties.
• 11 U.S. Code §109 – Who May be a Debtor.
• 11 U.S. Code §362 – Automatic Stay.