Understand the timing of consecutive court discharges.
Bankruptcy is supposed to be a fresh start, but things don’t always work out in your favor. If life’s happenings have led to financial distress again and you need to file a second time, what are the penalties and consequences? Does it affect your credit worse? Can you ever recover?
If you’re facing the possibility of having to file for bankruptcy again, the information below can help you understand the financial and credit impact of multiple bankruptcy filings. If you have questions or need to get started with an expert who understands your situation, call us or complete the form to the right to connect with a qualified professional.
If the goal is discharge, timing matters
For most consumers, the whole point of filing for bankruptcy is the ability to discharge the remaining balances on outstanding debts. With a few exceptions, like student debt or tax debt, most of the debts you have can be discharged through bankruptcy. This means that with asset liquidation (Chapter 7) or an average 3-5 year repayment plan (Chapter 13), you can get the burden of your debt off your back.
But according to stricter rules from the BAPCPA, there is a set period of time you have between consecutive discharges of your debts. In other words, if you discharge debt once, you have to wait a certain amount of time until you can legally discharge debt again. The amount of time depends on which type of filing you make first and next.
So while you can file for bankruptcy as many times as you need to, you won’t actually receive a second round of discharges on your debt until a certain amount of time has passed.
Time between Chapter filings
So here is a simple break down of how long you have to wait before you can receive a second discharge.
- Chapter 7, then Chapter 7 = 8 years from the first filing date
- Chapter 7, then Chapter 13 = 4 years from the first filing date
- Chapter 13, then Chapter 13 = 2 years from the first filing date
- Chapter 13, then Chapter 7 = 6 years from the first filing date*
*There’s an important exception to this rule that you should note. If you’ve paid off all of your unsecured debt holders back in-full or at least paid 70 percent of the claims made on a plan entered into in good faith, then you can file for Chapter 7 sooner.
True or false: If discharge is denied in a first bankruptcy filing, you can’t refile for bankruptcy with the same debts?
There is no law against refiling and asking for discharge on the same debt, but if the court denied you once then it’s unlikely they’ll discharge the second time either.
Issues with Chapter 7 conversion
When you file for Chapter 13 bankruptcy, part of the process will be that the court will officially approve the repayment plan you have to follow to get the discharge. If you can’t agree on a plan that the court will confirm, in some cases you can convert your filing to Chapter 7.
But when you’ve already filed once, you have these varying time requirements before your second discharge. So converting a Chapter 13 filing to Chapter 7 can be a problem. You may be past the amount of time required to receive a discharge with Chapter 13, but not long enough to receive discharge with Chapter 7.
This makes having the right bankruptcy services on your side even more essential on a second bankruptcy, because you may be navigating some tough waters.
Refiling after dismissal
In some cases, the first bankruptcy you file may be dismissed. Sometimes it can be a good thing, like your financial situation changed and you didn’t need to file anymore because you had other avenues to regain control. Dismissal can also be for bad reasons, like you didn’t follow procedure so you case was dismissed.
In any case, dismissal of bankruptcy does not prevent you from filing again. And the time limits described above don’t apply because your debts weren’t actually discharged – so there’s no grounds to wait between a first and second discharge. The only time limit you actually need to worry about is that you have to wait 180 days to file again if your first filing was dismissed by the court because you didn’t follow their instructions. Check with your attorney to see if this applies to you.