How Often Can A Person File Bankruptcy?
When faced with overwhelming debt and financial trouble, bankruptcy can provide a solution for individuals struggling to manage their finances.
There are limits to how often you can file for bankruptcy. The bankruptcy code outlines waiting periods and time limits for filing a new case after a previous filing. The most common types of bankruptcy are Chapter 7 and Chapter 13.
Chapter 7, also known as liquidation bankruptcy, allows for the discharge of unsecured debts such as credit cards and medical bills. In contrast, Chapter 13 involves a repayment plan where individuals can pay off their debts over three to five years.
After filing for bankruptcy, your credit score is likely to be negatively impacted. The impact may vary depending on the type of bankruptcy and the number of previous filings.
Multiple bankruptcy filings can stay on your credit report for up to ten years, making it challenging to obtain credit in the future.
Time Limits to File Bankruptcy Again
There are certain time limits and restrictions that individuals must adhere to when contemplating filing bankruptcy again.
The frequency at which one can file for bankruptcy depends on the type of bankruptcy previously filed and the chapter under which it was filed. Debtors must understand these time limits and restrictions to make informed decisions about debt relief options.
The bankruptcy code outlines these guidelines to ensure fair and equitable treatment for both debtors and creditors.
Waiting Periods for Filing a New Case After a Previous Filing
If any individual previously filed for bankruptcy, they may be wondering how long they need to wait before filing a new case. The waiting period depends on the type of bankruptcy they previously filed and whether they received a discharge of their debts.
For Chapter 7 bankruptcy, which involves the liquidation of assets to repay creditors, there is a waiting period of eight years after a previous Chapter 7 discharge. [1]
This means that if the debtor received a Chapter 7 discharge in the past, they will need to wait eight years before they can file for Chapter 7 bankruptcy again.
For Chapter 13 bankruptcy, which involves the creation of a repayment plan to pay off debts, the waiting period is much shorter. If the debtor received a discharge in a previous Chapter 13 case, they can file a new Chapter 13 case after only two years.
If they received a discharge in a Chapter 7 case, they must wait four years before filing a Chapter 13 case.
In some cases, individuals may opt for a “Chapter 20 bankruptcy.” This involves filing for Chapter 13 bankruptcy immediately after receiving a Chapter 7 discharge.
While it does not provide a second discharge of debts, it can help manage any remaining debts that were not discharged in the previous Chapter 7 case.
Automatic Stay When Filing a Second or Subsequent Case
When filing a second or subsequent bankruptcy case, debtors are granted the benefit of an automatic stay.
The automatic stay is a powerful legal protection that goes into effect immediately upon filing for bankruptcy. It is designed to provide relief and protection to debtors from collection actions by creditors.
The automatic stay prevents creditors from taking any collection actions against the debtor during the bankruptcy proceedings. This includes actions such as:
- Foreclosure
- Harassing phone calls from creditors
- Repossession
- Wage garnishment
The automatic stay allows debtors the opportunity to reorganize their finances and work towards a fresh start without the constant pressure and threat of collection actions.
Debtors must note that the automatic stay may be subject to certain exceptions and limitations when filing a subsequent bankruptcy case.
For example, if a debtor had a previous bankruptcy case dismissed within a year of filing the new case, the automatic stay may only last for 30 days. This is to prevent debtors from abusing the bankruptcy system.
The time limit for filing a new case can affect the length of the automatic stay. If a debtor filed a previous bankruptcy case within the last year, the automatic stay may not go into effect at all, unless the debtor gets approval from the court.
This is to prevent individuals from attempting to abuse the automatic stay by filing for bankruptcy repeatedly.
Exceptions to the Time Limit Rule
The time limit rule for filing bankruptcy again after a previous filing can be subject to exceptions in specific circumstances.
While there is typically a waiting period between bankruptcy filings, certain conditions may allow individuals to file bankruptcy sooner than usual.
One exception to the time limit rule is if the previous bankruptcy case was dismissed without a discharge.
In such cases, the debtor can file a new bankruptcy case immediately without having to wait. This exception recognizes that the debtor did not receive any debt relief in the previous filing.
Another exception applies if the debtor had a previous Chapter 13 bankruptcy case and is now seeking to file under Chapter 7.
In this scenario, the debtor may be able to file for Chapter 7 bankruptcy immediately if they have paid at least 70% of their unsecured debts through the previous Chapter 13 bankruptcy plan.
This exception allows debtors who have made significant efforts towards repayment to seek a different type of bankruptcy relief.
These exceptions have specific conditions and requirements that must be met. Consult with our experienced bankruptcy attorneys at the Law Offices of Richard West, to understand the eligibility and details of these exceptions and how they may apply to your circumstance.
Source:
[1] Egan, J. (2022, April 7). How Often Can You File For Bankruptcy? Forbes Advisor. https://www.forbes.com/advisor/debt-relief/how-often-can-you-file-for-bankruptcy/
