Can I File Bankruptcy Again?

Can I file a bankruptcy case even if I filed one before?

Life doesn’t always go according to plan. Sometimes clients find it necessary to file a second bankruptcy case to address debt issues. Can you file another bankruptcy case? In most cases, the answer is yes. The answer depends on several factors. The first factor is, What type of bankruptcy case was filed? And, second, was a discharge of debt obtained in that case?

I’ve talked at several bankruptcy conferences on this topic and it can get a little complicated, even for seasoned attorneys. First, there are two types of consumer cases an individual can file, Chapter 7 and Chapter 13. These Chapters simply refer to the bankruptcy code sections that define the type of relief available. Generally, Chapter 7 wipes out credit card and medical debt, but lets you keep your car or home loan, if you elect to do so. A typical Chapter 7 case does not last very long, about 3-4 months from the filing date. Chapter 13 is a debt consolidation plan that allows you to pay back all, or a portion of, your debt over time, up to five years.

Under either Chapter 7 or 13, any unpaid debt is forgiven or discharged at the end of the case. A discharge is an important event as it is the legal mechanism that officially wipes away your debt. This is what most consumers want or need: relief from their debt through a discharge.

I Thought Bankruptcy Laws Protected Me from Creditors?

Bankruptcy laws not only protect consumers, they are also designed to protect creditors. One way the law does this is to limit the number of times a consumer may receive a discharge. It wouldn’t be fair, for example, to allow a consumer to file a bankruptcy case every year and wipe out debt and never have to repay any debt. Congress has tried to balance the need for reasonable consumer protection from creditors and a fair limit on how often a consumer can file bankruptcy and receive a discharge.

Following is a brief discussion of what bankruptcy law allows. This is not intended to be legal advice for your particular situation and is only for general educational purposes.

If you filed a Chapter 7 case and received a discharge, you cannot file another Chapter 7 case for 8 years from the date the first Chapter 7 case was filed.

What about filing Chapter 13 after Chapter 7?

Yes, you can file a Chapter 13 case anytime after a Chapter 7 discharge. However, if you file too soon after Chapter 7, there are certain important restrictions in the new Chapter 13 case. If you can wait 4 years after the Chapter 7 case was filed, you can file a Chapter 13 case and receive a discharge. If you file Chapter 13 before the 4 year time expires, you can still file Chapter 13, but you will not receive a discharge. Sometimes circumstances necessitate filing a case within 4 years of a Chapter 7 discharge. An important thing to keep in mind is that even if you are not eligible for a Chapter 13 discharge, you are still entitled to all of the Chapter 13 protections. The primary protection is the automatic stay. This is a huge benefit to someone needing to stop a foreclosure, a repossession, or a wage garnishment. So, even if you are not entitled to a discharge, you may still be eligible for all of the benefits of bankruptcy protection.

What if I Filed Chapter 13 and Received a Discharge?

Can I now file another Chapter 13? If you filed a Chapter 13 case and received a discharge, you can file another Chapter 13 case after 2 years (from when the first Chapter 13 case was filed) and receive another discharge. If you file another case within 2 years, you are not eligible for a discharge. Don’t forget, you may still file another Chapter 13 case, but no discharge will be entered and the case will simply close without a discharge when concluded.

What if I want to file a Chapter 7 case after I received a Chapter 13 discharge?

To receive a Chapter 7 discharge, you will have to wait 6 years from when the first Chapter 13 case was filed. Filing after the 6 year period makes you eligible for a Chapter 7 discharge. Filing Chapter 7 when you are not eligible for a discharge will prohibit a case from even being filed. There is one exception to the 6-year rule: if in the prior Chapter 13 case creditors were paid 100% in full, then you can file a Chapter 7 case anytime. This is an important exception many lawyers overlook when interviewing potential clients. When I speak at seminars on this topic I always remind lawyers about this exception and the importance of properly researching the prior Chapter 13 case and the extent creditors were repaid.

What About Dismissal – Do I Still Get All Bankruptcy Protections?

This is another very tricky area of bankruptcy that lawyers must study closely. What if your Chapter 13 case does not complete for some reason? This happens frequently due to job loss, divorce, or injury, for example. Can you file another case and move forward? Yes, once the cause of the dismissal has been resolved, you can file another Chapter 13 case. You may not get all of the protections the law normally has to offer. But it may be enough to get you past the immediate financial hurdle. Remember, the law is designed to protect creditors, too. It is crafted to prevent debtors from filing back-to-back cases to thwart creditor action against them. This multi-case filing process is not fair to creditors. In other words, some debtors may try to take advantage of the law by abusing the system.

Extending Your Bankruptcy Protection

If you file a case within 1 year from when a prior case was dismissed, your bankruptcy protections will end unless you (or your lawyer) file additional paperwork asking the court to extend the law’s protection. If you do not ask for this extension, your protection against things like repossession or foreclosure might end. Again, there are exceptions to this rule. Consult with an experienced bankruptcy lawyer if you are facing another bankruptcy case.

An experienced bankruptcy attorney can explain all of the nuances of dealing with issues involving a prior case. Be sure you understand all of your rights, protections, and whether you are eligible for a discharge or the law’s full protection. If you are unsure of how to proceed, don’t hesitate to speak with an attorney. Most attorneys offer a free consultation or are willing to waive their consultation fee under certain circumstances. Understanding your rights is key to protecting your property and successfully moving forward financially.

Posted in: Bankruptcy