Legal Question in Bankruptcy in Maryland

Re: payments to debtors and withdraw of bankruptcy

Pertaining to your ability to withdraw you bankruptcy:

11 U.S.C.S. 707 (a) states that the court may dismiss a case under this chapter (i.e., Chapter 7) only after notice and a hearing and only for cause. This section, with the use of the discretionary word may, clearly differs from the dismissal provision for Chapter 13 cases, 11 U.S.C.S. � 1307, which provides that the court shall dismiss a case on the request of the debtor at any time. � 707 goes on to provide three instances of a debtor's actions which would lead to dismissal; however, these instances are not the exclusive and only ones that will result in dismissal. A voluntary withdrawal by a debtor of a Chapter 7 petition is allowed so long as the court finds cause. Except to the extent the three stated inclusions tend to suggest the parameters of cause as being faults of the debtor, the Bankruptcy Code does not provide a definition of cause.

The decision on dismissal falls squarely within the sound discretion of the court and such a decision will be reversed only if the exercised discretion has been abused. A motion to dismiss a bankruptcy case is a serious matter affecting the rights of the debtor and all creditors, and at the hearing on such a motion, the court is required to consider the impact that a dismissal will have on the various entities involved in the case and to ascertain which direction satisfies the best interest of all parties. The key decision is whether the dismissal is in the best interests of the creditors and the debtor. A voluntary dismissal will normally be denied when the dismissal will cause some plain legal prejudice to the debtor's creditors. Legal prejudice is found to exist where assets that would otherwise be available to the creditors are not available because of the dismissal.

Dismissal of a voluntary bankruptcy proceeding for the purpose of refiling another case is not cause for dismissal. And, a debtor is not entitled to a dismissal if only for the purpose of listing post-petition creditors in a new petition.

You should speak with an attorney as to your options with regard to the $25,000 suit that MAY be brought against you.

G. Joseph Holthaus III

(410) 799-9002

Re: payments to debtors and withdraw of bankruptcy

Assuming the inheritance was soon enough after filing that it gets paid to the trustee, it will be distributed first to the trustee for his expenses, fees and commissions; second to "priority" creditors (taxes, alimony and support, generally); and then to unsecured creditors, all only to the extent of allowed claims. If the alleged creditor files a proof of claim, it will be paid unless a party in interest objects. That would generally be the trustee or another creditor, as a debtor only has standing to object to claims in a 7 where there is a direct financial interest in the result (where there is a surplus in the estate, or possibly where it might otherwise go to non-dischargeable debts). Often you can get the trustee to object. At that point, the matter will be litigated unless the trustee/objecting creditor and the creditor at issue settle the matter.

As for your right to "withdraw" the bankruptcy (called "dismissing" it), no, you don't have the unilateral right. You can request the Court to allow the dismissal, but where such a request is made when assets are inherited or otherwise available for distribution, the request is unlikely to be granted.