Can You Change Your Mind After Filing for Bankruptcy?

Filing for bankruptcy can be a stressful decision. You may worry about the impact on your credit, or feel unsure if it’s really the right choice. It’s natural to have some second thoughts.

If you’re wondering “Can I change my mind after filing for bankruptcy?” – the short answer is yes, sometimes. Here’s what you need to know about backing out of bankruptcy, the pros and cons, and what your options are if you’ve had a change of heart.

The Bottom Line

Technically, you can dismiss a bankruptcy case after filing if circumstances change. But it’s not always simple. Once you file the bankruptcy paperwork with the court, your filing is public record and can’t be erased. Let’s walk through what happens step-by-step, so you understand the implications.

How To Dismiss Your Bankruptcy Case

Dismissing your bankruptcy case means asking the court to essentially cancel your filing. Here are the basics:

• You’ll need to submit a “motion to dismiss” to the bankruptcy court, explaining why you want to dismiss your case.
• The court will usually grant a dismissal, unless there are objections from creditors or the bankruptcy trustee.
• If approved, the court dismisses the case “without prejudice”, meaning you could potentially file again later.

Seems simple enough, right? But before dismissing bankruptcy, be aware of a few key points:

Your Filing Is Permanent Public Record

Just because your case gets dismissed doesn’t erase the initial bankruptcy filing. It remains searchable public record permanently. This can impact your credit score for up to 10 years.

You May Not Qualify to Refile Bankruptcy

If you file bankruptcy again within 12 months of dismissal, you’ll have to provide proof to the court that your financial situation significantly worsened. Otherwise, the court may not approve your case.

You May Owe More Money to Creditors

Here’s the big one. Any debts discharged by the court before dismissal are no longer wiped out. Creditors can resume collection efforts and you’ll owe that money again.

Let’s say your car loan was discharged by the court already. If you dismiss bankruptcy now, that unpaid car loan balance comes right back. And the creditor can repossess your car.

When Does It Make Sense to Dismiss Bankruptcy?

Clearly bankruptcy dismissal has some downsides. Your credit takes a hit. Debts bounce back. So why would anyone want to cancel their case?

There are a few scenarios where dismissal could make sense:

• You can afford to repay debts. If your financial situation improved, you may prefer to pay back what you owe vs. erasing it in bankruptcy.
• You need to keep collateral. Let’s say you filed Chapter 7 bankruptcy hoping to surrender your car. If you change your mind and want to keep the car, dismissing may stop repossession.
• Mortgage loan modification denied. Some filers pursue bankruptcy hoping to qualify for a home loan modification. If the modification falls through, they may dismiss the case.

The question is – do the benefits outweigh the risks?

What Are Your Options If You Changed Your Mind?

Say you regret filing bankruptcy but dismissal doesn’t make sense. What alternatives do you have? Here are a few possibilities:

Convert to Chapter 13 Instead of Chapter 7

If you filed a Chapter 7 liquidation case but want to keep assets, consider converting to Chapter 13 bankruptcy instead. This allows you to propose a repayment plan to creditors over 3-5 years.

Voluntarily Repay Debts

You could let the bankruptcy proceed, then voluntarily repay some debts later if you’re able. This is especially common for priority debts like taxes or domestic support obligations.

Reaffirm Debts

Reaffirming a debt means agreeing to repay it, even though it would normally be discharged. This allows you to keep assets like a car or home.

Redeem Assets

In Chapter 7 bankruptcy, you may be able to pay a lump sum to “redeem” certain assets from creditors, like your car. This lets you keep the asset without reaffirming the entire debt.

File Chapter 13 After Chapter 7

If you receive a Chapter 7 discharge, you can still file a Chapter 13 case later to deal with certain debts. The court may allow this if circumstances changed.

Talk To a Bankruptcy Lawyer

As you can see, dismissing or converting a bankruptcy case gets complicated quickly. Every situation is unique.

Before making any decisions, it’s wise to discuss your specific circumstances with a qualified bankruptcy attorney. They can advise you on the pros and cons of changing course after filing.

The bottom line? Yes, you can change your mind after filing bankruptcy if you need to. But carefully consider all the implications first, and understand why you originally filed. An experienced bankruptcy lawyer can help ensure you make the best choice.