Bankruptcy law doesn’t set a minimum period that you must wait before filing for bankruptcy a second time. However, there’s a catch. If you file too soon after wiping out debt in a previous case, you won’t be eligible for another debt discharge (forgiveness). Although there are times that it makes sense to file for bankruptcy even though you won’t receive a discharge, these situations are rare (more below). Because a bankruptcy filed too soon will end up being a waste of time and money in most cases, it’s essential to know how to time your bankruptcy filing.
Filing Under the Same Bankruptcy Chapter: Chapter 7 and Chapter 13
Here are the timeframes if you plan to file the same bankruptcy chapter that you filed the first time:
Successive Chapter 7 cases
You’ll have to wait eight years after the first Chapter 7 case filing date before filing the second case.
Successive Chapter 13 cases
Two years must elapse between filing dates before you’ll be entitled to receive a second Chapter 13 discharge.
Chapter 13 before Chapter 7
If the court granted your first discharge under Chapter 13 bankruptcy, you’d need to wait six years (from the Chapter 13 bankruptcy filing date) before filing for a Chapter 7 discharge. You won’t have to wait that long; however, if you paid unsecured creditors in full in the Chapter 13 case, or if you paid at least 70% of the claims, the plan was proposed in good faith and was represented your best effort.
Chapter 7 before Chapter 13
If the court granted your first discharge under Chapter 7, you’d have to wait four years from the Chapter 7 filing date before filing a Chapter 13 case.
When a Second Filing Might be Beneficial Even without a Discharge
Sometimes you don’t need a discharge you need time to pay off a debt. For instance, suppose that you owed federal taxes that you couldn’t discharge in bankruptcy, and you could not work out a reasonable payment plan. Rather than have your wages garnished, you could file for Chapter 13 bankruptcy and stretch out the payments over a five-year Chapter 13 bankruptcy payment plan. A similar approach is to file a Chapter 13 case immediately after receiving a Chapter 7 discharge (a procedure informally referred to as a Chapter 20 bankruptcy). Again, all you might need is time to pay off non-dischargeable debts, such as domestic support arrearages not a discharge.
However, not all courts allow the process, and it can be tricky to qualify for a Chapter 7 bankruptcy and then demonstrate that you have sufficient available income to pay into a Chapter 13 plan. It’s possible, though, after taking into account the debts wiped out. In any case, it would be wise to consult with a local bankruptcy lawyer before attempting to go this route.
What If You Didn’t Receive a Discharge in the First Case?
In most situations, you can file again and receive a discharge in the second bankruptcy if you didn’t receive one in the first matter. But that’s not always the case. Also, you lose the full benefits of the automatic stay the order that stops creditors from collecting when you file multiple bankruptcies in quick succession.
The court dismissed the first case
Unless the court orders otherwise, you can file again. A 180-day waiting period may apply if you failed to obey a court order or appear in the case, or you voluntarily dismissed the case after a creditor filed a motion for relief from the bankruptcy stay.
The court denied your discharge
You might be able to file again, but you probably won’t be entitled to a discharge of the debts listed in your first case. This is another unusual circumstance wherein you would be wise to seek the advice of an experienced bankruptcy lawyer.
When Are Multiple Bankruptcy Filings Abusive?
The term abusive bankruptcy filing can refer to a Chapter 7 filing that doesn’t meet the means test the qualification standard that determines a filer’s right to a debt discharge. But it can also describe a case filed by someone who inappropriately uses the bankruptcy process to evade a creditor or buy time in a collection action, such as a foreclosure or lawsuit. Simply put, the court frowns on debtors who file with no intention of following through with the case. Repeat filers face the consequences for using such tactics, such as a lack of protection from collections (the automatic stay won’t go into effect after multiple filings) or the denial of a discharge.
Filing for bankruptcy relief doesn’t guarantee a discharge; the order that wipes out qualifying debt. If you don’t follow the bankruptcy laws or procedures in your jurisdiction, the court might dismiss your case. Luckily, most dismissals are without prejudice, and you can immediately refile your case.
Dismissals With and Without Prejudice
When the court dismisses a case without prejudice, you can file another bankruptcy matter right away instead of being required to wait. You can also discharge all qualifying debts in the next case. This type of dismissal usually occurs because of a procedural mistake, such as a failure to file the correct forms, not as a result of unethical behavior. By contrast, a dismissal with prejudice will prevent you from filing another bankruptcy for a specific period, or forever prohibit you from discharging any of the debts existing at the time of your first filing.
The court will dismiss a case with prejudice if you:
• try to take advantage of bankruptcy by hiding assets
• use the automatic stay to buy time without intending to complete bankruptcy, or
• abuse the bankruptcy system in some other way.
Reasons for a Dismissal without Prejudice
After filing your case, you must comply with the bankruptcy rules and procedures. The court dismisses most matters because of the failure of debtors to:
• file the correct forms with the court
• submit supporting documentation to the bankruptcy trustee
• attend the meeting of creditors
• complete a debtor education (financial management) course
• make timely plan payments in a Chapter 13 case, or
• fail to meet any other deadlines or requirements.
Bankruptcy Dismissal and the Automatic Stay
In bankruptcy, the automatic stay protects the filer from almost all creditor collection activities. It stops them in their tracks. In most cases, the stay remains in place throughout the bankruptcy matter. However, if the court dismisses your case, your creditors can come after you to collect their debts once again. Mostly, you’re in the same position you were in before filing. Also, immediately filing another bankruptcy will limit your automatic stay in the new case. Here’s how.
• If you refile your case within one year after dismissal, the automatic stay will be limited to 30 days.
• If you had two or more bankruptcies dismissed within the year before you filed the most recent case, the automatic stay wouldn’t be in effect at all.
In either situation, you can file a motion to extend or impose the automatic stay in your new bankruptcy. You’ll need to be prepared to explain to the court the need for multiple cases.
Consult With a Bankruptcy Lawyer
If the court dismissed your case without prejudice, it’s reasonably clear that you ran into a problem in the previous matter. A bankruptcy attorney can help you fix the issue, as well as file a motion asking the court to grant or extend the automatic stay’s protection against creditors.
How to File for Bankruptcy
Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue. Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you can’t afford to hire an attorney, you may have options for free legal services. If you need help finding an affordable bankruptcy lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. It’s not simply a matter of telling a judge “I’m broke!” and throwing yourself at the mercy of the court. There is a process – a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps are:
• Compile financial records: List your debts, assets, income and expenses. This gives you, anyone helping you, and eventually the court, a better understanding of your situation.
• Get credit counseling within 180 days before filing: You can’t file for bankruptcy until you’ve gone through required bankruptcy counseling. It assures the court you have exhausted all other possibilities before filing for bankruptcy. The counselor must be from an approved provider listed on the Utah Courts website. Most credit counseling agencies offer this service online or over the phone, and you receive a certificate of completion once it’s done that must be part of the paperwork you file. If you skip this step, your filing will be rejected.
• File the petition: If you haven’t hired a bankruptcy lawyer yet, this might be the time to do it. Legal counsel is not a requirement for individuals filing for bankruptcy, but you are taking a serious risk if you represent yourself. Understanding federal and state bankruptcy laws, and knowing which ones apply to your case, is essential. Judges are not permitted to offer advice, and neither are court employees. There also are many forms to complete and some important differences between Chapter 7 and Chapter 13 that you should be aware of when making decisions. If you don’t know or follow the proper procedures and rules in court, it could affect the outcome of your case. Without legal advice, you’re also running a risk that the bankruptcy trustee can seize and sell your property.
• Meet with creditors: When your petition is accepted, your case is assigned to a bankruptcy trustee, who sets up a meeting with your creditors. You must attend, but the creditors do not have to. This is an opportunity for them to ask you or the court trustee questions about your case.
Some of the Consequences of Bankruptcy
The overriding principle of bankruptcy is that you get a second chance with your finances. Chapter 7 (known as liquidation), wipes away debt by selling non-exempt possessions that have some value. Chapter 13 (known as the wage earner’s plan) gives you an opportunity to develop a 3-to-5 year plan to repay all your debt and keep what you have. Both equal a fresh start, but many times without some of the property (real estate, cars, jewelry, etc.) that may have caused the financial problem in the first place.
Filing for bankruptcy impacts your credit score. Bankruptcy remains on your credit report for 7-10 years, depending upon which chapter of bankruptcy you file under. Chapter 7 (the most common) is on your credit report for 10 years, while a Chapter 13 filing (second most common) is there for seven years. During this time, a bankruptcy discharge could prevent you from getting new lines of credit and may even cause problems when you apply for jobs. If some of your debts include loans that were co-signed by family or friends, they could be responsible for repaying at least some of the debt. If you are considering bankruptcy, your credit report and credit score probably are damaged already. Your credit report may improve, especially if you consistently pay your bills after declaring bankruptcy.
Where Bankruptcy Doesn’t Help
Bankruptcy does not necessarily erase all financial responsibilities. It does not discharge the following types of debts and obligations:
• Federal student loans (unless you meet very strict criteria)
• Court-ordered alimony and child support
• Debts that arise after bankruptcy is filed
• Some debts incurred in the six months before filing bankruptcy
• Some taxes
• Loans obtained fraudulently
• Debts from personal injury while driving intoxicated
It also does not protect those who co-signed your debts. Your co-signer agreed to pay your loan if you didn’t, or couldn’t pay. When you declare bankruptcy, your co-signer still may be legally obligated to pay all or part of your loan.
Bankruptcy Dismissal vs. Bankruptcy Discharge
The Automatic Stay
At the time of dismissal, you will no longer enjoy the protection of an automatic stay. An automatic stay is an order that stops creditors from taking action to collect debts during a bankruptcy case. This means, your collectors can continue or resume all collection efforts against you, including lawsuits, garnishments, foreclosure, and asset seizures. Since there is additional interest and/or penalties accrued from the time of a bankruptcy filing, you will be liable to pay off more than the amount that was due before you filed for bankruptcy.
Voluntary Bankruptcy Dismissal
A voluntary bankruptcy dismissal is still up for approval of a bankruptcy court. Their decision lies on the type of bankruptcy chapter you filed.
It is not easy to ask for dismissal of a Chapter 7 bankruptcy case. When you file for this case, it is best to assume that you cannot back out of it. For example, you changed your mind about proceeding with the bankruptcy filing because you found out you have a lot more to lose than you assumed when you filed for bankruptcy, you request the bankruptcy court to dismiss your case by filing a motion. The court can decline your request especially if creditors will not get a good deal out of dismissing your case. On the flip side, you may not show up at the 341A hearing so that the court dismisses your case. Non-appearance at this hearing in Utah will usually result in the trustee filing a motion to dismiss the case. However, you would be better off having the case dismissed without you voluntarily filing a motion to dismiss. A voluntary dismissal for Chapter 7 case prevents you from refilling a bankruptcy case for 180-days.
It is a different case for voluntary dismissal in Chapter 13 bankruptcy. According to the Bankruptcy code, you can dismiss a Chapter 13 case easily. Federal bankruptcy law allows the debtor to either dismiss a Chapter 13 case or to convert it to Chapter 7 at any time unless your case has previously been converted from another chapter of the Bankruptcy Code. You can ask for dismissal at any point in your Chapter 13 case, even as soon as you file it, perhaps because of a change of heart. You can also have the bankruptcy court dismiss your case once the payment plan has been approved if your financial situation has improved and find out you do not need a repayment plan anymore. All you need to do to have your Chapter 13 case dismissed is to have your New Jersey bankruptcy lawyer file a motion to dismiss your case. The court cannot keep you in a Chapter 13 case against your will.
Consequences of Chapter 13 Bankruptcy Dismissal
As with Chapter 7 bankruptcy voluntary dismissal, there are also consequences if you dismiss a Chapter 13 bankruptcy. You must be aware that a dismissal will make all unpaid or disputed debts due and demandable. It includes all interest, finance charges, legal fees, all late charges not allowed by the Bankruptcy Court as well as all debts of creditors who did not file their claims. As a requirement, you will be directly deal with the creditors on their terms. There will be no involvement from the bankruptcy court.
For example, your creditors may already file a motion in court to lift the automatic stay if you’re not paying your car loans. When the court lifts the automatic stay, your lender can repossess the car or demand payment.
If you file a motion to dismiss your case before the creditor has filed a motion to lift the stay, you will not be subject to the 180-day bar. However, if you filed for voluntary dismissal after the creditor has filed its motion to lift the stay, you can’t file another bankruptcy case for 180 days. This rule is in place to discourage debtors from dismissing a case then filing another just to restore the automatic stay after the same has been lifted as a result of a motion filed by a creditor.
Bankruptcy Dismissal by the Court
This happens when the debtor failed to meet the requirements due in the case filed. It can also happen when the debtor has filed in bad faith. Failure to do the following can be grounds for dismissal:
• File the required forms and supporting documents
• Pay the court filing fees
• Pass the means test
• Complete the required courses (credit counseling course and debt management course)
• Attend the 341 meeting or the meeting with creditors
• To keep up with the Chapter 13 payment plan
• Accurately disclose all of your income, assets, liabilities, and other required financial information, which constitutes as bankruptcy fraud
In most situations, except for dismissal with prejudice, you can counter the trustee’s motion to dismiss. You must submit the required or correct documents and completing the requirements.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506