What Is A “Voluntary Dismissal”?

Bankruptcy Attorney

In some cases, rather than wait for the courts to decide if a bankruptcy petition can move forward the individual filing may seek the voluntarily dismissal of the proceedings and back out of the bankruptcy. This can happen if a petitioner has suddenly come into an unexpected sum of money and no longer feels that bankruptcy is in their best interests.

The courts will decide by a “hearing of the evidence” if this is in fact true and decide whether or not the person qualifies for a voluntary dismissal. That is not always the case and the petition for a voluntary dismissal can be rejected by the courts. While Chapter 12 and 13 bankruptcies are granted the statutory right to voluntary dismissal unless they have been converted from another chapter, Chapter 7 and 11 proceedings are not granted the same status.

The applicant must show cause as to why this is the best option. The reason for this is that the courts have found that this process can be opened up to abuse by debtors who are only seeking temporary protections that bankruptcy proceeding can offer them. The automatic stay that is issued to creditors on behalf of the debtor can be easily manipulated if this were not the case. A recent example would be the many foreclosures that were brought on by the subprime mortgage scandal.

People realized that by filing for bankruptcy protection the automatic stay would allow them to stall the foreclosure process; they would then seek a voluntary dismissal after a period of several months, only to file again after the mortgage holder began the foreclosure proceedings once again. This and other types of abuse of the process forced the courts to re-adjust their procedures in order to stem the damage this type of abuse to the system was causing. For more information of Voluntary Dismissals or any other type of bankruptcy issue be sure to contact a qualified bankruptcy attorney.

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