What Happens When the Court Dismisses a Bankruptcy Case Without Prejudice?

Filing for bankruptcy relief doesn't guarantee a discharge—the order that wipes out qualifying debt. The court might dismiss your case if you don't follow bankruptcy laws or your jurisdiction's procedures. Luckily, most dismissals are "without prejudice," and you can immediately refile your case. Find out what happens when the court dismisses a bankruptcy case with and without prejudice.

The Differences Between Dismissals With and Without Prejudice

When the court dismisses a case without prejudice, you can file another bankruptcy matter right away instead of being required to wait. You can also discharge all qualifying debts in the following case. This type of dismissal usually occurs because of a procedural mistake, such as failing to file the correct forms, not because of unethical behavior.

By contrast, a dismissal with prejudice will prevent you from filing another bankruptcy for a specific period or forever prohibit you from discharging any of the debts existing at the time of your first filing.

Common Reasons for Bankruptcy Dismissals

After filing your case, you must comply with the bankruptcy rules and procedures. The court dismisses most matters without prejudice because of the failure of debtors to complete a procedural requirement:

• file the correct forms with the court
• submit supporting documentation to the bankruptcy trustee
• attend the meeting of creditors
• complete a debtor education course in financial management
• make timely plan payments in a Chapter 13 case, or
• fail to meet deadlines and requirements.

Some of the reasons the court will dismiss a case with prejudice include:

• trying to take advantage of bankruptcy by hiding assets
• using the automatic stay to buy time without intending to complete bankruptcy, or
• abusing the bankruptcy system in some other way.

In bankruptcy, dismissals with prejudice usually follow wrongdoing. Learn more about what happens after the court dismisses a case with prejudice.

How a Bankruptcy Dismissal Affects the Automatic Stay

In bankruptcy, the automatic stay protects the filer from almost all creditor collection activities, and, in most cases, the stay remains in place throughout the bankruptcy process. If the court dismisses your case and lifts the automatic stay, your creditors can come after you to collect their debts once again. You're essentially left in the same position you were in before filing.

Another impact of dismissal is that the automatic stay will be limited if you file a new case immediately. Here's how.

• If you refile your case within one year after dismissal, the automatic stay will be limited to 30 days.
• If you had two or more bankruptcies dismissed within the year before filing the most recent case, the automatic stay wouldn't go into effect.

In either situation, you can file a motion to extend or impose the automatic stay in your new bankruptcy. You'll need to explain the need for multiple cases to the court.

Consult a Bankruptcy Lawyer

When the court dismisses your case without prejudice, it's reasonably clear that you encountered a problem in the previous matter. A bankruptcy attorney can help you fix the issue and file a motion asking the court to grant or extend the automatic stay's protection against creditors.