How Does A Bankruptcy Case Come To A Close?



When a Bankruptcy Case Ends

Basically, a bankruptcy case comes to a close, either by a dismissal or a discharge; however, there are other ways that a bankruptcy case can close.

Let’s take a look at how bankruptcy cases generally end:

  • The most common and most desirable way for a bankruptcy case to end is by a discharge. In a Chapter 7 bankruptcy or a Chapter 13 bankruptcy , a discharge means that the unpaid debts are rendered uncollectible and the debtor is freed of their obligations to pay the remaining unsecured debt.
  • The least common and least desirable way for a bankruptcy case to close is by dismissal.  A bankruptcy case is dismissed usually because there is some type of problem with the case. Usually a bankruptcy case is dismissed because of some error or fraudulent activity on the part of the debtor. For example, if the debtor tried to hide assets, failed to properly disclose income or failed to properly file their bankruptcy petition, they could face a dismissal of their bankruptcy case.
  • But the debtor can also voluntarily dismiss their Chapter 13 bankruptcy case if they can no longer continue the repayment plan. For example, if a debtor lost their job or faced a significant reduction in their income they would be allowed to dismiss their Chapter 13 bankruptcy.  However, it may be a little more difficult to voluntarily dismiss a Chapter 7 bankruptcy case.
  • Finally, a debtor may also choose to close a bankruptcy case by converting it to some other Chapter. For example, a debtor in Chapter 13 bankruptcy may decide to convert their case to a Chapter 7 bankruptcy liquidation if they can no longer make plan payments due to financial difficulties. This conversion will need to be approved by the bankruptcy court.