I Changed My Mind - Let Me Out Of This Bankruptcy!

If you file a Chapter 7 bankruptcy, you must be prepared to see it through to its conclusion. Much to many debtors' surprise, there is no automatic right to voluntary dismissal in a Chapter 7 bankruptcy.

Although a case can be dismissed if a Chapter 7 debtor fails to appear at a Meeting of Creditors, or fails to submit required documentation prior to attending a Meeting of Creditors, most debtors won't be looking to voluntary dismiss their bankruptcy at that stage of the case. It is usually not until after a Chapter 7 Trustee discovers a valuable non-exempt asset that is subject to liquidation when a debtor will change his/her mind and want to cancel or stop the bankruptcy.

However, as Judge Cristol once said, it is easy to stick your head in the mouth of a lion, but it isn't so easy to take it out!

When can a Chapter 7 case be dismissed?

Whether a motion to dismiss should be granted is governed by 11 U.S.C. § 707(a), which states that the court may dismiss a case under this chapter only after notice and a hearing and only for cause, including:

Unreasonable delay by the debtor that is prejudicial to creditors;
Nonpayment of any fees or charges required under chapter 123 of title 28; and
Failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521(a), but only on a motion by the United States trustee.

Although 11 U.S.C. § 707(a) does not expressly state that it applies to a debtor seeking voluntary dismissal of his/her own petition, courts have found that Chapter 7 debtors may move for voluntary dismissal under 11 U.S.C. § 707(a). Courts have also held that a Chapter 7 debtor does not have an absolute right to obtain a voluntary dismissal of his/her case. A debtor seeking voluntary dismissal must show cause.

The 3 examples listed in § 707(a) are not exclusive but rather illustrative. Accordingly, courts look at the facts of each case to determine whether sufficient cause exists for dismissal. The burden for demonstrating cause is on the debtor.

Will a chapter 7 case be dismissed if the debtor shows cause?

Even if the debtor shows cause, the court nevertheless should deny a motion to dismiss if there is any showing of prejudice to creditors.

There are 6 factors courts generally consider when ruling on a voluntary motion to dismiss and whether prejudice exists. The factors are as follows:

Whether all of the creditors have consented.
Whether the debtor is acting in good faith.
Whether dismissal would result in a prejudicial delay in payment.
Whether dismissal would result in a reordering of priorities.
Whether there is another proceeding through which the payment of claims can be handled.
Whether an objection to discharge, an objection to exemptions, or a preference claim is pending.

What should you do?

If you are considering filing a Chapter 7 bankruptcy, you should definitely consult with experienced bankruptcy attorneys (like those at Leiderman Shelomith, P.A.) so that you know what you are getting into before it is too late. Our attorneys pride ourselves on being able to spot issues and explain risks before a bankruptcy case is filed.

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April 23, 2015 - Broward County Bar Association, Bankruptcy Section - Issues in Individual Chapter 11 cases

Zach B. Shelomith is a panelist.

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Introduction to Chapter 7 and Chapter 13 Bankruptcy Seminar sponsored by Pincus Professional Education
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About Leiderman Shelomith, P.A.

Leiderman Shelomith, P.A. was founded by Jonathan Leiderman and Zach Shelomith in 2003. The firm quickly built an excellent reputation across South Florida as a boutique bankruptcy law firm, handling both personal and corporate bankruptcy matters, including Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, as well as state court Assignments for the Benefit of Creditors. Felipe Plechac-Diaz joined the firm as an associate attorney in 2014. The firm began representing borrowers with their federal, state, and private student loan matters in 2014, including the defense of student loan lawsuits.

The firm's attorneys, who have 38 years of combined legal experience, have been recognized as a South Florida Legal Guide Up and Comer, a Super Lawyer Rising Star for the State of Florida, a Florida Legal Elite Up and Comer, and a Florida Legal Elite. Our attorneys are members of the National Association of Consumer Bankruptcy Attorneys, the American Bankruptcy Institute, and the Bankruptcy Bar Association for the Southern District of Florida, among other organizations. The firm's attorneys are also frequent lecturers at seminars and community programs, speaking about bankruptcy law to attorneys and the general public.

The firm, Mr. Leiderman, and Mr. Shelomith, are AV® Preeminent Rated Attorney's, awarded by LexisNexis® Martindale-Hubbell®, for having obtained the highest possible peer-review rating for their ethical standards and legal ability.

The firm represents debtors, creditors, and bankruptcy trustees in all aspects of bankruptcy cases, including litigation and appeals, handling both liquidations and reorganizations. The firm also represents borrowers in all aspects of student loan law, including federal, state, and private student loans. Our office is conveniently located in suburban Fort Lauderdale, Florida, and is easily accessible from anywhere in Miami-Dade, Broward, and Palm Beach Counties. We handle bankruptcy debtor cases across the Southern District of Florida, particularly in Broward, Miami-Dade, Palm Beach, and Monroe Counties, and other bankruptcy cases and student loan matters throughout the entire State of Florida.

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