May 5th, 2010 by Reed Allmand 
Whether a debtor has filed for Chapter 7 bankruptcy or Chapter 13 bankruptcy they may be tempted or convinced to back out of their bankruptcy case after it has begun. One of the major reasons a debtor backs out of bankruptcy is a lack of income and the promise from some unscrupulous debt consolidation company that they can help them resolve their debt issues outside of bankruptcy. But before a debtor makes the fateful decision to back out of their bankruptcy case, they should consider the following:
- If a debtor backs out of the bankruptcy case the automatic stay will end immediately and creditors will be allowed to resume their collections against the debtor.
- If the debtor had been facing a wage garnishment or lawsuit before they filed bankruptcy, those activities will resume almost immediately once the bankruptcy case is closed by the debtor. What this could mean is that the debtor will experience deductions from their paycheck and/or a summons to appear in court regarding a creditor lawsuit.
- After the bankruptcy, the debtor will still owe all of their debts plus any interest that may have accrued. While bankruptcy allows many benefits such as the partial or total discharge of debts, once the bankruptcy case is closed prematurely by the debtor, all of those benefits are lost. Creditors can and most likely will add interest and all types of fees to your debts.
- If a debtor is considering ending their bankruptcy case, specifically a Chapter 13 bankruptcy case because they don’t have income due to a job loss, they should explore the possibility of converting their case to a Chapter 7 bankruptcy. Debtors who have lost income while in Chapter 13 bankruptcy often convert their case to a Chapter 7 bankruptcy and receive a discharge for the balance of their debts.
Before you make the decision to close your bankruptcy case prematurely, please speak with your bankruptcy attorney about the ramifications of your actions and also other options available to you.
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
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