Though bankruptcy was developed to provide a fresh start to qualifying debtors, it recognizes that some may need more than one second chance to gain any real control over their finances. Because bankruptcy only applies to debts that are outstanding when the case is filed, many people need to file more than once in their lifetime to reduce or eliminate additional debts that began accumulating after they filed a previous case. Technically, there is no limit to the number of times an individual can file for bankruptcy, but there are certain waiting periods that must pass between two filings before the debtor can receive the full benefits of filing.
The length of the applicable waiting period varies depending on the type of bankruptcy filed for in the past and the type being filed for now, and may be further impacted by the outcome or findings in a prior case. In general, though, the length of time that must pass between filings ranges from 6 months to 8 years.
If you have filed for Chapter 7 or 13 bankruptcy before and are considering filing again, it’s critical to understand the applicable waiting period before deciding when to file your next application. The content below includes details and insights on the advantages and disadvantages of refiling under either chapter and provides guidance for calculating any waiting periods that may apply.
Filing a New Chapter 7
Chapter 7 bankruptcy provides those with little-to-no disposable income the opportunity to eliminate debt they’ve accumulated while trying to support themselves or their families. Under this chapter, a debtor can discharge, or cancel, nearly all the debts they owe, as their limited resources leave them unable to make the minimum payments due to creditors. To be eligible for the type of relief afforded by Chapter 7, then, an individual’s petition for bankruptcy must show that their monthly income is less than the median monthly income in the state, that this amount is very close or equal to their typical household expenses each month, and that these expenses are necessary and reasonable.
A debtor who fits the above criteria is likely a good candidate for Chapter 7, but if they filed for a bankruptcy that resulted in a discharge in the past, the debtor should wait to file again under this chapter until they have confirmed that any of the following waiting periods, if applicable, have expired. Otherwise, the bankruptcy will not end with a discharge of any of the debts they currently owe.
- Prior Chapter 7: Waiting period of 8 years from the date the prior Chapter 7 was filed.
- Prior Chapter 13: Waiting period of 6 years from the date the prior Chapter 13 was filed, unless the debtor in the prior case the paid 100% of their unsecured creditors or at least 70% of the claims, under a plan proposed in good faith and representative of the debtor’s best efforts.
Filing a New Chapter 13
Debtors who have enough disposable income each month to pay at least a portion of their unsecured debts may not discharge these debts through Chapter 7 bankruptcy. Instead, they can file under Chapter 13, where debtors must make monthly payments of an agreed-upon amount for a period of 3-5 years. If the debtor fails to make two or more monthly payments during the duration of their plan, their case may be dismissed unless they have a court-approved plan for catching up the missed payments. On the contrary, if all monthly payments have been made by the date the plan is set to expire, the debtor’s remaining and unpaid debts will be discharged.
- Prior Chapter 7: Waiting period of 4 years from the date the prior Chapter 7 was filed.
- Prior Chapter 13: Waiting period of 2 years from the date the prior Chapter 13 was filed.
Time Restraints on Filing After a Dismissal
To reiterate, the Chapter 7 and 13 waiting periods listed in the sections above only apply if the debtor received a discharge order at the end of the prior relevant bankruptcy. They are inapplicable if the prior bankruptcy was filed and dismissed without a discharge, though there may be other time restraints the debtor will be required to follow if refiling after a prior dismissal.
Depending on the reason for the dismissal, a debtor may be required to wait up to 180 days and pay a new filing fee before refiling under Chapter 7 or 13. These requirements are sometimes used as a form of penalty, as they are usually assessed by the court after dismissing a case on grounds of bad faith or an abuse of the bankruptcy process. Such grounds for dismissal could include an attempt by the debtor to hide assets or to file under Chapter 7 despite knowing they are ineligible based on their income.
Even after any 180-day period imposed by the court has passed and the debtor can file a new case, they will not receive the full benefit of an automatic stay if they file within one year of their prior dismissal. The automatic stay is a tool that temporarily prevents creditors from taking collection efforts against a debtor who has filed for bankruptcy. If the debtor has already had one dismissal during the year prior to the date their new case is filed, the length of the stay will be limited to 30 days, but can be extended by a showing of “good cause” demonstrated to the court, and will be eliminated completely if the number of dismissals during the prior year is two or more.
Converting a Pending Bankruptcy to Chapter 7 or 13
In some cases, a debtor may need to convert their pending bankruptcy to a different chapter due to changes in circumstance that have occurred since filing. The debtor’s income may have increased, making them ineligible for Chapter 7, or may have decreased so much that they cannot continue making their monthly payments under their Chapter 13 payment plan. Other times, the debtor may choose to convert their case to protect an asset or to discharge a debt they weren’t able to under the original chapter.
While converting a case is relatively simple and quick, there is an important issue to consider before converting from Chapter 13 to 7. If the debtor converting to Chapter 7 has received a discharge under that chapter within the 8 years prior, they will not be able to discharge their debts once the case is converted, and will likely lose any non-exempt assets of value. A debtor facing this dilemma may have a better outcome by dismissing their Chapter 13 case, selling the assets they can, and paying some debts until they are outside of the waiting period and can file and be eligible for discharge.
If you are considering filing again but are unsure when to do so, call Reynolds & Gold Law at 417-883-7800 to schedule a consultation with a bankruptcy attorney.