Chapter 13 Dismissal for Non-Payment: Stay, Refiling, and Credit

When you stop making Chapter 13 plan payments, the trustee or a creditor can ask the bankruptcy court to end your case, and federal law lists that kind of default as a specific reason a judge can dismiss it.¹ A Chapter 13 dismissal for non-payment is not automatic, though. Between the motion and the ruling, you usually have a window to respond, modify the plan, convert to Chapter 7, or in narrow circumstances ask for a hardship discharge. If dismissal has already happened, you may still be able to get the case reinstated, but the clock is short and the paperwork requirements are strict.

How Missed Payments Turn Into a Motion to Dismiss

You send monthly payments to the Chapter 13 trustee, who distributes the money to creditors under the confirmed plan. When those payments stop, the trustee or a creditor can file a motion to dismiss or convert your case. The statute authorizes dismissal “for cause,” and the listed causes include failing to start making timely payments and a material default on any term of a confirmed plan. Falling behind on court fees, or on child support or alimony that came due after you filed, can also trigger a motion.¹

The word “may” in the statute is doing real work. A judge is not required to dismiss the case the moment you miss a payment. The court weighs whether dismissal or conversion better serves creditors and the estate, and the gap between the motion being filed and the hearing is the window where most cases are saved.

Responding Before the Court Rules

Once the motion is filed, the court sets a hearing and you get a limited time to respond. Local rules commonly give about 21 days, though the exact deadline depends on your district. Missing that deadline is one of the fastest ways to lose the case, because judges routinely grant unopposed motions.

An effective response does two things: it explains why payments stopped, and it shows a realistic path to getting current. Paperwork carries this argument. If you lost a job, attach the layoff notice. If a medical emergency drained the budget, include the bills. You will also need to update Schedule I (income) and Schedule J (expenses) so the judge sees your current household finances,² state the exact amount of missed payments, and propose a budget that covers both the ongoing plan payment and the arrears. A written plan for catching up carries far more weight than a promise to do better.

Alternatives That Can Save the Case

Dismissal is not the only outcome when payments fall behind. Three alternatives, each with a different fit, are built into the Bankruptcy Code.

Modify the Plan

You, the trustee, or any unsecured creditor can ask the court to modify a confirmed plan at any time before payments are complete. A modification can reduce what a class of creditors receives, extend the payment timeline up to the five-year statutory maximum, or adjust distributions to account for payments a creditor already received outside the plan. The statute also allows modifications to account for reasonable, documented health insurance costs.³

If income dropped or expenses rose, a modification filed before dismissal is far simpler than trying to undo one afterward. This is the option most Chapter 13 debtors underuse.

Convert to Chapter 7

You have an absolute right to convert a Chapter 13 case to Chapter 7. The statute says the court cannot take that right away, and any waiver you signed is unenforceable.¹ The federal court fee to convert is $10.⁴ Conversion keeps the automatic stay in place; dismissal does not.

The trade-off matters. Chapter 7 is a liquidation, and a trustee can sell non-exempt assets to pay creditors. If Chapter 13 was protecting a home from foreclosure or a car with equity, converting could put those assets at risk. If you have little non-exempt property and simply cannot sustain monthly payments, conversion can produce a discharge of qualifying debts in months rather than years.

Ask for a Hardship Discharge

If the situation is truly dire, you can ask the court to discharge your remaining debts without completing plan payments. Three conditions have to be met: the failure to complete payments must stem from circumstances you should not fairly be held responsible for; unsecured creditors must have already received at least as much as they would have in a Chapter 7 liquidation; and further plan modification must not be practical.⁵ Courts grant hardship discharges sparingly. A permanent disability or catastrophic medical event that ends your ability to earn income is the kind of situation this provision exists for.

What Changes the Moment Your Case Is Dismissed

If the court dismisses the case, the effects hit quickly and from several directions.

The Automatic Stay Ends

The stay that blocked collections, seizures, and garnishments ends with dismissal. Property of the estate revests in whoever held it immediately before the case, and any liens voided during the case are reinstated.⁶ Mortgage lenders can restart foreclosure, auto lenders can repossess, and creditors holding judgments can pursue wage garnishments and bank levies. Interest, penalties, and late fees that were effectively frozen during the case start running again, and creditors may add fees for the months the case was pending if plan payments did not cover the full contractual amount owed.

Co-signers Lose Their Protection

Chapter 13 includes a co-debtor stay that protects co-signers on consumer debts, but it only lasts as long as the case. Once the case is dismissed or converted to Chapter 7, that protection vanishes and creditors can pursue the co-signer for the full balance.⁷ A family member who co-signed a car loan or private student loan is exposed the day the case ends.

Possible Tax Consequences on Canceled Debt

When a creditor writes off $600 or more, it reports the canceled amount to the IRS on Form 1099-C.⁸ A completed Chapter 13 discharge would normally keep that canceled debt out of your taxable income. Dismissal means no discharge, so if a creditor later settles or writes off the debt, you may owe income tax on the forgiven amount. Form 982 allows an insolvency exclusion if your total debts exceeded your total assets when the debt was canceled, but you have to document that.⁹

Refiling After Dismissal

Dismissal does not permanently bar you from filing again, but it creates real obstacles.

The 180-Day Bar

If the court dismissed the case because you willfully failed to follow court orders or failed to appear, you cannot file any new bankruptcy case for 180 days. The same 180-day bar applies if you voluntarily dismissed after a creditor filed a motion to lift the automatic stay.¹⁰ During those six months you have no bankruptcy protection at all. A dismissal that does not fall into either category generally leaves your right to refile intact, and the statute says a standard dismissal does not bar you from discharging those same debts in a later case.⁶

A Weaker Stay if You Do Refile

Refiling within a year of a dismissal carries a built-in penalty. The automatic stay in the new case expires after 30 days unless you persuade the court to extend it, and you carry a presumption that the new filing is not in good faith, which you have to overcome with clear and convincing evidence.⁷

If two or more of your cases were dismissed in the prior year, there is no automatic stay at all when you refile. You would have to move for one, with the same good-faith presumption working against you.⁷

Moving to Vacate a Dismissal

If your case has been dismissed but not yet closed, you can file a motion asking the court to undo the dismissal and reinstate the case. The window is narrow, and courts expect proof, not apologies.

The motion should include updated income and expense schedules, documentation of whatever caused the missed payments, and a concrete proposal for curing the arrears. Many districts publish local forms for this on the bankruptcy court’s website. If the case has already been closed, reopening it is more complicated and costs $235 in federal filing fees.⁴ You must serve the motion on the trustee and every affected creditor and file a certificate of service.

At the hearing, the judge decides whether reinstating the case is feasible. Expect the trustee to push back if you cannot explain what is different now. Judges who grant these motions often require an immediate lump-sum payment toward the arrears as a condition of reinstatement. Failing to appear, or arriving without the required financial documentation, all but guarantees the dismissal stands.

What Dismissal Does to Your Credit

A dismissed Chapter 13 case still shows up on your credit report. Credit bureaus track the filing itself, and dismissal does not erase it. A Chapter 13 filing generally stays on your report for seven years from the filing date whether the case ended in discharge or dismissal. Some debtors assume dismissal is “better” for credit because no discharge occurred. In practice it can be worse: you absorbed the credit hit of filing bankruptcy but received none of the debt relief a completed case would have provided.

1
Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal
2
United States Courts. Schedule I – Your Income (Individuals)
3
Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation
4
United States Courts. Bankruptcy Court Miscellaneous Fee Schedule
5
Office of the Law Revision Counsel. 11 USC 1328 – Discharge
6
Office of the Law Revision Counsel. 11 USC 349 – Effect of Dismissal
7
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
8
Internal Revenue Service. About Form 1099-C, Cancellation of Debt
9
Internal Revenue Service. About Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
10
Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor