Can You File for Bankruptcy More Than Once?
They say that lightning never strikes twice in the same place, and that may be true. However, financial misfortunes come with no such guarantee. Job loss, divorce, business downturn, or serious illness can strike any family at any time, regardless of whether these families are good or poor money managers. This is because these financial storms, for the most part, are mostly or entirely beyond the debtor’s control. As a result, it is important to understand your rights in terms of how often you can file bankruptcy.
There are actually two considerations — the automatic stay and debt discharge (forgiveness) — and it is important to understand both these things.
What Is Automatic Stay?
Section 362 of the Bankruptcy Code prohibits moneylenders from taking adverse action against debtors. Moreover, that is one of the things that makes bankruptcy perhaps the most powerful debt relief tool in history. Unfortunately, a few people take advantage of the system, and use the automatic stay to frustrate their creditors. As is true in so many areas of life, since a few people refuse to follow the rules, everyone faces limits in terms of how often you can file bankruptcy.
If either you or the judge dismisses a prior bankruptcy and you file another voluntary petition within a year, the automatic stay ends after thirty days. If you have dismissed two or more cases in a year, there is no automatic stay.
That being said, judges routinely grant motions to extend or impose creditor stays regardless of how often you can file bankruptcy — if you show a legitimate need for a stay and have a reasonable explanation for the prior dismissal(s). Some courts have specific procedural requirements, e.g., they only consider a motion to impose a creditor stay if it is filed simultaneously with the voluntary petition.
There are many legitimate reasons you might voluntarily dismiss your bankruptcy; for example, you might wish to convert from a Chapter 13 repayment to a Chapter 7 liquidation bankruptcy. Some other dismissals are involuntary, and these involuntary dismissals affect how often you can file bankruptcy.
If the judge dismissed a prior bankruptcy “with prejudice,” which means with restrictions on how often you can file bankruptcy, you must wait 180 days to file another voluntary petition. Most judges dismiss cases with prejudice if the debtor refused to:
- obey a court order,
- has already filed multiple cases to frustrate moneylenders (what the Bankruptcy Code calls a “serial filer”), or
- there is other evidence of misconduct.
If the judge dismissed the prior case because you lied on a form or committed some other fraud, the judge can place even stronger limits on how often you can file bankruptcy, or prohibit the discharge of certain debts.
Beyond the automatic stay and filing restrictions, multiple filers may be unable to obtain a discharge. This restriction is not as bad as it may seem. This is because many people file voluntary petitions not to discharge debts but to obtain relief from wage garnishment, halt a foreclosure, or stop other adverse action by using the creditor stay. The discharge rules for how often you can file bankruptcy are:
Chapter 7 to Chapter 7:
People who receive a Chapter 7 discharge must wait eight years before they can obtain another Chapter 7 discharge.
Chapter 13 to Chapter 13:
Now, the rules start to get a little more complicated. There is a two-year waiting period for a subsequent Chapter 13 discharge if you filed a similar case earlier. However, the repayment period is either three or five years. So theoretically, debtors could stay in Chapter 13 forever as long as they act in good faith.
Chapter 7 to Chapter 13:
It is a very common tactic to follow a Chapter 7 with a Chapter 13. This is why some practitioners call it a Chapter 20 bankruptcy. There is a four-year waiting period for a Chapter 13 discharge after a Chapter 7 discharge. However, most debtors in this situation do not want another discharge. Instead, they simply want to take advantage of the Chapter 13 repayment period to pay off a delinquent mortgage balance or take other similar action.
Chapter 13 to Chapter 7:
Debtors must wait six years after a Chapter 13 discharge to get a Chapter 7 discharge. That is, unless the Chapter 13 took care of at least 70 percent of their unsecured debts and there is evidence of good faith.
Debtors sometimes try to get around these restrictions by filing a new case in a different district. Or they can do this by using their spouse’s name on the petition. However, these tactics hardly ever work and usually only result in additional punishment.
To Learn More About How Often You Can File Bankruptcy
At the Northwest Debt Relief Law Firm, we help people just like you manage and eliminate their debts. For more information on how often you can file bankruptcy, call today for a free consultation.