I talked to a woman the other day who filed her own Chapter 7 bankruptcy petition. She was calling me in distress. She had just left her meeting of creditors. The trustee was planning on taking the nest egg she had saved for her retirement. While qualified retirement accounts like a 401(k) or an IRA are protected in bankruptcy, money that you have put in a savings account and labeled it your retirement account is not protected in Colorado.
She wanted to know how she could get the court to dismiss her case so that she could hold onto that money. I had to tell her that she could file a motion to ask the court to dismiss her case, but unfortunately I didn’t think her chances were that good.
Unlike Chapter 13 bankruptcy, a Chapter 7 bankruptcy will not be automatically dismissed at the request of the debtor. In order for a Chapter 7 bankruptcy to be dismissed, you must provide notice to all of the creditors that you listed in your petition as well as the bankruptcy trustee. If any of them files an objection, the court will hold a hearing to decide the issue.
A Chapter 7 bankruptcy can only be dismissed for cause, so you must show the court that you have a sufficient reason. In this lady’s case, the court will have to decide whether her not knowing that her retirement fund could be taken by the trustee is sufficient reason. You can be sure that the trustee will object to her motion and argue that her ignorance of the exemption rules in Colorado is not sufficient reason for the court to dismiss her case.
There is no definition of what constitutes sufficient reason for dismissal in the Bankruptcy Code. Some examples that courts have cited as insufficient include the debtor’s desire to re-file to include debts that have been incurred after the first case was filed or to avoid the sale of non-exempt (unprotected) property. If no creditor or the trustee objects, a court may allow dismissal.
Since there is no clear cut answer to whether or not you can voluntarily dismiss your Chapter 7 bankruptcy case, it would probably be best to consult an attorney to discuss your options and chances for success. Our job is to make sure that you make it through the Chapter 7 process without having to give any property or income to the trustee. We won’t file your petition until we’re sure that won’t happen or that you understand the risks involved with filing if you own any non-exempt property.
If you have any questions about the Chapter 7 bankruptcy process in Colorado, we hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy attorney. You can make an appointment by calling 303.331.3403 or by using our online scheduling system.