Dismissal of Bankruptcy Cases and Your Assets
We've talked about the dismissal of bankruptcy cases, the reasons behind a dismissal and how to avoid a dismissal; but what happens to the assets which have become a part of the bankruptcy estate after a case is dismissed?
Let's take a look at a few facts:
In the case of both a Chapter 7 bankruptcy and a Chapter 13 bankruptcy if the case is dismissed, the assets held by the bankruptcy estate are usually returned to the debtor:
The bankruptcy law says:
The dismissal of a bankruptcy case "revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case" unless the court orders otherwise. 11 U.S.C. § 349.
In laymen terms, any assets of the debtor held by the bankruptcy estate are then returned to the debtor upon dismissal of the bankruptcy case unless otherwise ordered by the bankruptcy court. What this means is that if a debtor made payments of let's say $10,000 to the bankruptcy estate in a Chapter 13 bankruptcy and the case was dismissed BEFORE the money was distributed to creditors, the money would be returned to the debtor unless otherwise ordered by the court.
On the other hand, if the $10,000 was already distributed to the creditors before the bankruptcy case was dismissed the debtor would not get that money back. The debtor would be able to get any other assets which had not be liquidated and distributed to creditors, such as houses, vehicles, jewelry, stocks, bonds and any other assets. The bankruptcy court does not distribute assets to creditors AFTER a bankruptcy case has been dismissed, unless the court has order it to do so.
Have Questions About Your Assets and Bankruptcy?
If you have any questions regarding your assets and bankruptcy let us know. You can submit your questions here or even set up a free consultation.