American Apparel is reportedly about to seek relief in the bankruptcy court . . . again. Just one year ago, the company filed its first bankruptcy case. In late 2014, the company ousted its founder and then CEO, Mr. Dov Charney. Litigation ensued and the company’s sales continued to decline until, in October 2015, the company filed its first bankruptcy. American Apparel restructured and emerged from bankruptcy in February of this year. But apparently the restructuring plan hasn’t been enough. Fortune reports that sales have not grown fast enough so a second trip to the bankruptcy court seems likely.
Filing Bankruptcy More than Once
You may be wondering if it’s legally possible to file for bankruptcy more than once. Is this something that only big companies can do? Or, can individual consumers get bankruptcy relief more than once as well? Occasionally, I consult with a prospective consumer client who has been in a bankruptcy case before. They then find themselves in my office because things haven’t gone too well since their prior bankruptcy case. So, they wonder if bankruptcy can help again. The answer is yes, it’s possible to file a bankruptcy case more than once. This isn’t an option limited to big companies. But, the situation must be carefully scrutinized to determine the effect of the first case on a second case.
In the individual consumer re-filing context, it must be determined if the previous case will have any effect at all on the relief sought in the second case. Depending on how long ago the previous case was filed and the outcome of that case, there may be absolutely no effect of that case on obtaining complete relief in the second case. For example, if the prior case was filed longer than eight (8) years ago, the second case will not be affected in any way by the fact that the previous case had been filed. If, on the other hand, the previous case was filed less than eight (8) years ago, then there are at least three (3) factors to consider prior to filing the second case:
- the date the previous case was filed
- the chapter under which the previous case was filed
- and the outcome of the case, i.e., was the case dismissed or was a discharge granted.
Careful consideration must be given to these factors to determine if the second case will provide the relief sought. For example, suppose the previous case was filed under Chapter 7 five years ago and a discharge was granted in that previous case. In such circumstances, a Chapter 7 discharge is not available in a second Chapter 7 case because the law prohibits it. However, in such circumstances, a second case under Chapter 13 could be filed and a discharge entered in that case. The reason is that law permits the Chapter 13 discharge in a second case as long as that second case is a Chapter 13 case filed longer than four (4) years after the previous Chapter 7 case was filed.
So, if you are currently overwhelmed by financial troubles and you have previously filed a bankruptcy case, you may be able to file another case without any limitations whatsoever. Or, if not, you will likely still be able to file another case; but, there may be certain limitations in the second case that you must work with or for which you must plan. In any event, don’t let your current troubles prevent you from seeking the help and advice of a competent consumer bankruptcy attorney. You’ll be glad you did.