In a perfect world, filing for bankruptcy protection is something you would only do once in your life. Unfortunately, as we all know, we don’t live in a perfect world. So, what happens if you find yourself in a position where you need to file bankruptcy to protect yourself from creditors, but you’ve filed a bankruptcy previously?
The first thing to understand is that the Bankruptcy Code limits how often a person can file for bankruptcy and receive a discharge. If you have previously filed a Chapter 7 case (straight bankruptcy) and need to file another Chapter 7, then you must wait 8 years from the date you filed the first case. If you file before that 8 years has elapsed, the Court will dismiss the case immediately for not waiting the required number of years. However, you may be eligible to file a Chapter 13 case and receive a discharge. When filing a Chapter 13(debt consolidation) after a previous Chapter 7 the time limit is only 4 years.
In a reverse situation (where there was a previous Chapter 13 case), you must wait 6 years from the date of filing to be eligible for discharge in a Chapter 7. In some rare situations you can file a Chapter 7 earlier and receive a discharge, but only where the previous case 1) paid 100% of unsecured debts or 2) paid 70% of unsecured debts and the Court is satisfied that you acted in good faith and put forth your best effort. If you are going to file a Chapter 13 after a previous Chapter 13, then you need only wait 2 years to be eligible for discharge.
Something else to keep in mind is that you don’t need to be eligible for a discharge to file a Chapter 13 case. Even if you aren’t eligible for discharge, filing a Chapter 13 case would still give you the protection of the Automatic Stay. This means that when you file you are protected from any sort of garnishment, repossession, or foreclosure. The Court would not have the power to reduce or eliminate your debts, but you would be protected so long as you followed your proposed debt consolidation plan. You essentially give yourself up to 5 years time to repay debts without having to worry about debt collectors.
Finally, keep in mind that these same time limits apply when converting from one type of case to another. Suppose you filed a Chapter 7 previously and you need to file again, but it has only been 7 years so you file a Chapter 13. You follow the Chapter 13 plan and then intend to convert the case to a Chapter 7. However, the time limit measures from the filing date of the first case to the filing date of the second case, not the date of conversion. Since only 7 years had passed from the filing of one case to the next, any attempt to convert would be dismissed by the Court.
The timing of when to file a case can have a huge impact on whether or not your bankruptcy case will succeed, and as you can see the laws in this area can be very complicated. At our Bond & Botes affiliated offices we take the time to provide each of our clients a free initial consultation with one of our experienced attorneys. Whether you are contemplating filing bankruptcy for the first time or find yourself needing to file a second case, please come and speak with us. We will discuss your situation and help you navigate the complex laws and rules of the Bankruptcy Court.