By William Waldner, Esq.
You filed Chapter 13 bankruptcy in New York to get a handle on your debts – maybe to save your home – and now a notice says your case has been, or is about to be, dismissed for nonpayment. It is a gut-punch, but it is not the end of the road. Let’s walk through why this happens and, more importantly, what you can do next.
Why a Chapter 13 Gets Dismissed for Nonpayment
A Chapter 13 plan runs on monthly payments to the trustee for three to five years. When those payments stop, the trustee’s job is to ask the court to dismiss the case. Usually the cause is simple and sympathetic: a job loss, a pay cut, a medical bill, or a plan payment that was set too high to begin with because expenses were underestimated. Understanding what the bankruptcy trustee looks for helps explain why even a couple of missed payments can trigger a motion to dismiss.
The Dismissal Process: What to Expect
Payments do not just stop quietly. The trustee files a Motion to Dismiss, and you receive a copy in the mail along with a hearing date. That notice is your window. You have a chance to respond, to cure the missed payments, or to ask for a change – and showing up, ideally with your attorney, is what keeps the case alive. If you do nothing, the judge will almost certainly grant the motion.
What Happens the Moment Your Case Is Dismissed
The biggest consequence is that the automatic stay lifts. The shield that stopped collection calls, foreclosure, repossession, and wage garnishment is gone, and creditors can resume where they left off. Any foreclosure can restart, a lender can move on your car, and garnishments that were frozen can begin again. You are essentially back where you started – sometimes worse, because interest kept accruing while you were in the plan.
Can You Stop the Dismissal Before It Happens?
Often, yes – if you move quickly. The simplest fix is curing the default by catching up on the missed payments. If your income has dropped for the long term, your attorney may instead ask the court to modify the plan under 11 U.S.C. § 1329, which can lower your payment or stretch the plan out. In narrow cases where completing the plan is truly impossible through no fault of your own, a hardship discharge under 11 U.S.C. § 1328(b) may be available, though the bar is high. Before you fall behind, it is also worth reading about deferring your Chapter 13 payments.
Your Options After a Dismissal
If the case is already gone, you still have several paths:
| Option | What It Means | Key Consideration |
|---|---|---|
| Refile Chapter 13 | Start a new case with a realistic plan | The automatic stay may be limited (see below) if you refile within a year |
| Convert or file Chapter 7 | Wipe out eligible unsecured debts | Requires passing the means test; does not cure arrears on a house or car |
| Negotiate directly | Settle or set new terms with creditors | No court protection; creditors need not agree |
| Do nothing | Let collection resume | Not advised – leads to lawsuits, garnishment, and lost assets |
Refiling Chapter 13
There is usually no mandatory waiting period to refile after a dismissal for nonpayment, unless the court dismissed your case “with prejudice” – which can bar a new filing for 180 days under the Bankruptcy Code’s refiling rules. The catch is the stay: if you file again within one year of a dismissal, the automatic stay lasts only 30 days unless your attorney asks the court to extend it and proves the new case is filed in good faith. Your new plan needs to fix whatever sank the first one, so before refiling it helps to understand your Chapter 13 repayment percentage and build a budget you can actually keep.
Converting to Chapter 7
If your finances have worsened to the point where no repayment plan is realistic, converting your Chapter 13 to Chapter 7 may erase most unsecured debts outright. You will need to pass the means test, and Chapter 7 will not help you catch up on a mortgage or car loan you are behind on – so this route fits best when keeping those assets is no longer the goal.
What If This Has Happened More Than Once?
Repeat filings draw closer scrutiny. If two or more of your cases were dismissed in the past year, the automatic stay may not take effect at all when you file again, and your attorney would have to ask the court to impose it. Courts also look harder at a pattern of dismissals, so a fresh, well-documented plan matters more each time. Our guide on how soon you can file bankruptcy again in New York explains these limits in detail.
Where Do You Go From Here?
A dismissal feels like a step backward, but you still have real options – the key is acting before creditors regroup. If your Chapter 13 has been dismissed or a motion is on its way, what would change for you if you knew today which path actually protects your home and your paycheck?
Law Office of William Waldner — 469 Seventh Avenue, 12th Floor, New York, NY 10018 Call 212-244-2882 to schedule your free, confidential 20-minute consultation. We handle bankruptcy cases exclusively, in the Southern and Eastern Districts of New York.
