Most often than not, filing a bankruptcy case for the first time can be a stressful process for debtors. Also, most people would refer to bankruptcy in a negative way. But if filing a case for the first time can be stressing, how much more taxing would it be if a second or third bankruptcy case is filed by the same debtor?
The Need for Re-filing
Financial trouble can strike a debtor more than once. With that in mind, it is important that every person – bankrupt or not – knows how often a person can file for bankruptcy. The simple fact that bankruptcy offers debtors a fresh start and a long-lasting debt-relief is also another factor why some debtors travel the path of bankruptcy for more than one time.
Filing for Multiple Bankruptcies
Technically, a person is allowed to file multiple bankruptcy cases. There is actually no limit to how often a person can file for bankruptcy. That is just to say that if necessary, debtors can file for bankruptcy cases without any limit. But there is the matter of discharges to consider – a debtor can file multiple bankruptcy cases but he will not be eligible to multiple bankruptcy discharges until a set minimum time has been followed.
The Difference Between Filing a Bankruptcy Case and a Bankruptcy Discharge
Most people who go bankrupt wish to have their debts discharged. This way, they will not be liable to any debts anymore so they won’t have to pay their debtors. However, a discharge cannot be granted if a debtor has enough income to settle his debts through a repayment plan. When a bankruptcy discharge is given, the debtor has to wait for a set time, which usually takes up years, before another discharge is given. Can the same debtor file for another bankruptcy? The answer is yes, but the debtor cannot expect any discharge too soon. In short, filing a second bankruptcy case too soon after a discharge has been granted is only a waste of time and money. But this should not be the case if the debtors know how to time and when to do their second filing.
Multiple Bankruptcy Rules
Since Chapter 7 and Chapter 13 are the most common types of bankruptcy chapters, this post will discuss the varying rules when a debtor can file for another bankruptcy under the two chapters.
Chapter 7 bankruptcy
If a debtor received a discharge under Chapter 7, he or she is entitled to file for another bankruptcy case under Chapter 7 and Chapter 13.
The thing is that, if a debtor who has previously filed for a Chapter 7 bankruptcy case wants to file another case under the same chapter and be given a discharge, he or she has to wait eight years more from the date of filing of the previous Chapter 7 bankruptcy. Filing a case prior to the set time of eight years will make the bankruptcy court deny the debtor a discharge – which in most cases, is the goal of a Chapter 7 bankruptcy case. A denied discharge only means that still, the debtor will be held responsible to pay his debts to creditors.
Also, a debtor who filed a previous bankruptcy case under Chapter 7 can file another case under Chapter 13 after four years. Then and only then can a debtor re-filing for a Chapter 13 bankruptcy can be given a complete discharge. Just like in the first case, a debtor must wait four years from the date of their filing for a previous bankruptcy case under Chapter 7.
Chapter 13 bankruptcy
In the case of a Chapter 13 bankruptcy, filing for a Chapter 7 bankruptcy case for the second time around demands that the debtor wait six years from the date of filing the first Chapter 13 bankruptcy case. After six years, a debtor has the chance to have his debts discharged by court. Bankruptcy cases filed prior to the set time limit will make debtors pay their unsecured creditors at least 70% of their debts or else they will not be granted a discharge.
If another Chapter 13 bankruptcy case would be filed, the debtor only has to wait two years before he or she can file for another bankruptcy under Chapter 13. Just like with the other bankruptcy chapters, filing another bankruptcy prior the waiting period will result in the denial of the Chapter 13 discharge.
The Reason for the Time Limit
The bankruptcy court allows multiple filing of bankruptcy cases by the same debtor. But a discharge cannot be granted until a few set years as a waiting period to avoid people from abusing the bankruptcy system. The government wants to help its bankrupt citizens make a fresh start and a clean slate of finances but not to use bankruptcy as a tool to continuously run up their debts high and simply file for a discharge. With the time limits, debtors are prevented to file another case for such a brief period of time.
Aside from the time limits when filing multiple bankruptcy cases, the bankruptcy court has also reduced the benefit of the automatic stay. That is, filing multiple bankruptcy cases for a short period of time would be allowed by dismissing claims and would forfeit a debtor’s full benefits of the automatic stay. Also, the court can prevent another bankruptcy case from being filed if a prior case was dismissed by failing to abide court rules and orders or if the debtor requested the dismissal.
The Bottom Line
In some cases, filing for a second bankruptcy is necessary. It is very important to note that hiring a bankruptcy attorney is required if a debtor is unsure of whether or not he or she is qualified to file for another bankruptcy. Whether it is a case of filing for bankruptcy for the first time or the second time around, debtors should always know the options available to them. By having the right information through a bankruptcy lawyer, debtors would find the process of filing a bankruptcy case much smoother and easier for them to do.