Dismissal of Bankruptcy

Definition - What does Dismissal of Bankruptcy mean?

Dismissal of bankruptcy is the termination of a bankruptcy case prior to its normal end when the court stops all proceedings pertaining to that case. A dismissal can be with prejudice or without prejudice.

A bankruptcy case can be dismissed in a variety of circumstances. Potential reasons for dismissal can differ based on the type of bankruptcy (such as Chapter 7 or Chapter 13) filed by the debtor(s). Determining the type of dismissal of bankruptcy can instruct a debtor on how to proceed with their bankruptcy case.

Justipedia explains Dismissal of Bankruptcy

A dismissal with prejudice considers a party's privilege or right as lost or waived and bars a party from bringing subsequent proceedings on the same case. A dismissal without prejudice does not consider a party's privilege or right as lost or waived. A party is not barred from refiling.

In Chapter 7 bankruptcy cases, dismissal is rare and generally occurs when a debtor has not complied with the duties under the bankruptcy code. This can include not filing the required documents with the court or abusing the provisions of Chapter 7. In Chapter 13 bankruptcy cases, a case can be dismissed for noncompliance as well. However, a debtor has a right to dismiss the case if they cannot complete the plan as they agreed to it.

An exception to this rule is in the context of a bankruptcy case converting from Chapter 13 to Chapter 7. A bankruptcy case can only be dismissed by the debtor's motion if the dismissal is in the best interests of the creditors and the estate.
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