If you decide that bankruptcy isn’t for you after you file your court papers, you can ask the court to dismiss your case before you get your discharge. For example, say you file a Chapter 7 and then find out that you have to give back that 3-carat diamond ring your sweetie gave you recently.
Or in the case of a Chapter 13, maybe you’ve been making payments and eating peanut butter for a month and can’t go on. Or, looking on the bright side, perhaps you get a windfall inheritance from a rich uncle and can pay off the Chapter 13 in one fell swoop.
No matter what the reason, you can call the whole thing off and get a dismissal. Keep in mind, however, that the credit-reporting bureaus pick up the record of your bankruptcy filing and report it, even if you stop the process without getting out of any debts.
The bureaus must report that the filing was dismissed, but the record of your filing a bankruptcy stays on your credit report and continues to lower your score for the remainder of the reporting period (up to ten years). Both you and your creditors have the same rights and remedies as you had before you filed your bankruptcy case.
If you ask for a dismissal, you won’t be the first to do so. In fact, the law has a specific section that deals with people who not only change their minds but also change them back again. Perhaps after you back out of the bankruptcy to save the diamond ring, your creditors turn up the heat to the point where you’d gladly give them the ring to go away.
Here’s how the change works the second time around: In your first filing, after you file the paperwork with the courts, you receive an automatic stay (or suspension) of collection activity on the part of your creditors. The length of time for the collection stay can vary depending on the type of debt or action pending, but generally it’s in place until you discharge your debts.
But if you change your mind, ask for a dismissal, and then change your mind and refile a second time within one year of the original filing, the automatic stay is for only 30 days. So you have to get all your testing, counseling, and paperwork done in the 30-day period or the collectors and foreclosers return in force.
If this is your third such filing in a year, you don’t get any stay unless the court orders it. In other words, when you file for bankruptcy, do your best to make sure that it’s a decision you can live with for the long haul.