Withdrawing from Bankruptcy: Circumstances Where it Makes Sense

When someone files a motion to enter Chapter 7 or 13 bankruptcy proceedings, there is always a conditional nature to the filing. This means that at any point in the proceedings if the debtor’s financial circumstances change, he or she may opt to enter a motion to withdraw from the bankruptcy filing process, and return to being responsible for all of the debt he or she owes to creditors. There is a process to this procedure, so it’s imperative the debtor is sure that withdrawing from bankruptcy is the action he or she wants to take.

When Withdrawing from Bankruptcy Makes Sense

The most frequent circumstances which allow a debtor to withdraw from a bankruptcy filing are: 

• The debtor acquires a better paying job, or receives a raise
• The debtor receives an inheritance which allows him or her to resolve each debt without the need for bankruptcy proceedings
• An agreement is reached between the debtor and enough of the listed creditors to resolve the debts outside of bankruptcy court

Whenever someone finds himself in a financial situation that doesn’t require a bankruptcy, the person has the option of withdrawing from the action. Most courts won’t hold the bankruptcy up if the debtor files to withdraw because the withdrawal relieves the court from what could be a lengthy process. Furthermore, creditors won’t ever contest a withdrawal from bankruptcy because it means the debtor has found a way to resolve the debt rather than discharge it.  

How to File a Withdrawal 

The first thing debtors need to do when considering filing a petition to withdraw from a bankruptcy filing is to ensure that the withdrawal is truly warranted. Once the withdrawal is finalized, a debtor will not have another chance to file for bankruptcy as easily as the initial filing was. 

Once the debtor is secure in knowing that the withdrawal is the best option available, the next step is to contact the clerk of court wherever the case is being handled and obtain the petition or motion to file for withdrawal from bankruptcy, and fill it out completely. Once the form has been completed, the court trustee must be contacted to discuss the possible outcomes of a withdrawal, as a successful withdrawal may be hindered by the trustee’s objection.  

After filing the completed petition to withdraw, along with a description of the circumstances that led to the motion being filed, copies of the petition must be sent to all of the involved creditors, allowing them their mandated allotment of time to object. If no party objects to the filing, the bankruptcy filing will be omitted from the court and the debtor will be reinstated as the responsible party for all of the debts that were involved in the bankruptcy filing. 

Getting Help

If you are considering withdrawing, you should speak with a bankruptcy attorney who can explain your options. Your lawyer can also help you with the process of filing the paperwork to withdraw.