Bankruptcy is usually a once-in-a-lifetime event. Sometimes, though, bad things happen to good people and a person might find herself needing to file bankruptcy a second time. Then the question arises, how often can someone file bankruptcy? As with most things in the law, the answer is, it depends.
Was a Discharge Granted?
The first and most important factor in filing a second bankruptcy is whether a discharge was granted in the first bankruptcy. Remember, a discharge is the whole point of filing bankruptcy in the first place. A discharge is the court order saying that the debtor is not responsible to pay any of the debts that were subject to the discharge. If no discharge was granted, there is no waiting period before filing a second bankruptcy.
Just because there’s no waiting period doesn’t mean filing a second bankruptcy shortly after a first was dismissed will be fully beneficial to the debtor. The reason is the automatic stay. When a bankruptcy is filed, usually the automatic stay operates as a shield against creditors’ collection efforts. All collection action must stop. Garnishments cannot continue. Collection lawsuits are stopped. Creditors cannot contact a debtor demanding payment. The automatic stay is unconditional on the first filing. However, if the debtor has filed bankruptcy more than once in the 12 months preceding a current filing, the stay is conditional. On the second filing within 12 months, the stay goes into effect, but the debtor must ask the court to continue the stay. On third or more filings within 12 months, the stay does not automatically go into effect. Instead, the debtor must ask the court to impose the stay.
The reason for the conditional stay after the first filing is that too many debtors were abusing the automatic stay. They would file a Chapter 13 to prevent repossession or foreclosure. When, as was always the case with these abusers, their Chapter 13 was dismissed because they couldn’t make plan payments, they would wait a few weeks or months until the creditor was about to repossess or foreclose and file again. In some cases, debtors were able to stall creditors for years in this fashion without ever paying for the car or other collateral the creditor held. To prevent that, the automatic stay provisions were amended to make the stay conditional on repeat filings within a 12-month period.
If a discharge was granted in a prior bankruptcy, how soon another bankruptcy can be filed depends on what the first case was and what the second case is proposed to be. In all cases, the time is measured from the date of filing to the date of filing.
Chapter 7 to Chapter 7
This is probably the most common situation. Someone files Chapter 7, receives a discharge, and within a few years finds themselves back in debt. If Chapter 7 was filed and a debtor wants to file a second Chapter 7, the waiting time is eight years. A debtor filing Chapter 7 on March 1, 2013, would be eligible to file Chapter 7 again on March 1, 2021.
Chapter 7 to Chapter 13
Many times, a debtor will realize she isn’t eligible for a second Chapter 7 discharge because it hasn’t been eight years since the date of the first filing. In this case, the debtor may file Chapter 13 four years after filing Chapter 7.
Chapter 13 to Chapter 7
If a debtor completed a Chapter 13 plan and received a discharge, and then finds that she needs a second bankruptcy, assuming she qualifies for Chapter 7 under the Means Test, she may file Chapter 7 six years after filing the Chapter 13.
Chapter 13 to Chapter 13
The waiting time between successive Chapter 13 cases is only two years. Because the minimum time that a person must be in a Chapter 13 is three years (unless she can repay her creditors in full in a shorter time), this means a person could be in Chapter 13 almost perpetually.
Chapter 20 isn’t a real bankruptcy chapter. It’s the name given to the situation where a person files a Chapter 7 and receives a discharge for those debts that are dischargeable, and then files a Chapter 13 for those debts that are not dischargeable, such as taxes or student loans. There will be no discharge in the Chapter 13, because the waiting period of four years hasn’t passed, and the debts are non-dischargeable anyway. The point of Chapter 20 is to prevent those creditors holding non-dischargeable debts from garnishing wages and otherwise trying to collect, and to give the debtor time to make payments that she can afford.
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