One of the most frequent questions I am asked is:
How many times can I file a bankruptcy case?
How long must I wait to file in between bankruptcy cases?
There is No Limit to The Number of Bankruptcy Cases One Can File
The answer to the first question is:
You can file bankruptcy as many times as you want (assuming you are eligible to file bankruptcy under a given chapter–for example, you cannot file a Chapter 13 case if you have unsecured debts exceeding $383,175¹).
You Don’t Need To Wait To File A New Case, Unless You Need A Discharge of Debts
The answer to the second question is:
There is no time limit for filing a new case.
That’s right, I said it. You can file another case right after the prior one is closed.
And sometimes there are very good reasons for doing so (see below).
But the usual key issue is whether or not you can receive a discharge of debts in the new bankruptcy case.
Discharges of debts are usually (but not always, as explained below) the primary reason for filing a bankruptcy.
And the answer to the dischargeability question depends on:
- Which chapter you are filing,
- Under which chapter you previously filed, and
- Whether you received a discharge.
Time Between Bankruptcy Filings To Get Discharge of Debts
Here is the definitive quick-reference guide to answer the question:
How long must you wait in between bankruptcy filings in order to receive a discharge of debts in the newly filed bankruptcy case?
Case to be filed–Chapter 7: You can receive a discharge of your dischargeable² debts unless:
- you received a discharge in a prior Chapter 7 or Chapter 11 case filed (commenced) within 8 years of the filing of the “new” case or,
- received a discharge in a Chapter 13 case filed within 6 years prior (UNLESS the payments made in the Chapter 13 totaled 100% of allowed claims in the case, or at least 70% of the claims and the plan was proposed in good faith and was the “best efforts” of the debtor).
Case to be filed–Chapter 13: You can receive a discharge of your dischargeable debts unless:
- you received a discharge in a prior Chapter 7, 11, or 12 case filed (commenced) within 4 years prior to the filing of the “new” case or,
- you received a discharge in a Chapter 13 case filed within 2 years prior of the “new” case.
Case to be filed–Chapter 11: There is no specific time limit after a previous case in order to obtain a discharge in Chapter 11 EXCEPT if the Chapter 11 case is liquidating all (or substantially all) assets and no business is being conducted after consummation of the plan. In that instance, the time period is the same as Chapter 7.
Important Factors to Remember:
Note that the date the discharge was entered in the prior case is completely irrelevant. It is the date the case was filed that starts the time clock running for this purpose.
Also note that if the prior case did not result in a discharge, but was instead dismissed, then there is no time limit on filing a new case (absent a court order to the contrary)
If your prior case was originally filed under one chapter, then converted to another chapter, most courts will use the date of the original (pre-conversion) filing date to calculate the time. But this is an unclear legal issue at this time, and may also vary depending on which chapter under which you seek to file the new case.
Important Other Reasons to File Besides Discharge
Even if you are not eligible to achieve a discharge of debts, there are still reasons to file the next case, particularly a Chapter 13.
What are they, you might ask?
The automatic stay in bankruptcy, which prevents creditors from taking any collections actions during the bankruptcy case, still applies regardless of the ability of the debtor to discharge debts.
So how is this helpful?
Let’s say you owe tax debts and the IRS wants you to pay them in full within 24 months. By filing a Chapter 13 case, you can stretch those tax payments over 60 months, at zero percent interest!
Same thing can be done with student loans, although unlike certain taxes, the student loans need not be paid 100% during the 60 month Chapter 13; thus, it may be necessary to file multiple back-to-back Chapter 13 cases to continue the protection on student loan payments.
Or, let’s say you’ve just filed a Chapter 7 case and gotten your discharge, but you have a junior lien against your home that can be removed in a Chapter 13 case (see http://bit.ly/1OMFFoA for more details on that). In that case you can filed the Chapter 13 and remove the lien even though you won’t be getting a discharge! (and you cannot remove such liens in a Chapter 7)
The above is known to bankruptcy professionals as doing a “Chapter 20” case.
These, and more, are all possibilities to discuss with a qualified and experienced bankruptcy lawyer in your area.
¹ of noncontingent, liquidated debts. This figure is accurate as of January 2016, but is adjusted periodically by Congress.
² Not all debts are able to be discharged, so that is why I mention “dischargeable debts”. See more on which debts can be discharged.
Image Courtesy of See-ming Lee