Understanding Bankruptcy

How Often Can You File for Bankruptcy?

While consumers may have the best intentions when they borrow money, there are times when debt becomes unmanageable. Typical situations that leave families struggling to pay bills include any loss of income, unexpected medical emergencies and divorce.

Bankruptcy is a last-resort solution that can help consumers liquidate assets to pay off their debts when their finances spiral out of control. The two types of bankruptcy available to consumers, Chapter 7 and Chapter 13, offer a different path to a debt-free future. However, both help debtors repay or discharge delinquent debts they cannot manage on their own.

Chapter 7 vs. Chapter 13 bankruptcy: What is the difference?

Are there limits that dictate how often you can file bankruptcy?

If your previous bankruptcy was a Chapter 7

If your previous bankruptcy was a Chapter 13

What to do if you think time limitations may apply in your case

Chapter 7 vs. Chapter 13 bankruptcy: What’s the difference?

It’s important to note the differences between Chapter 7 and Chapter 13 bankruptcy before we discuss how often consumers can file for this type of protection.

Chapter 7 bankruptcy is a process that helps consumers liquidate their assets and pay off delinquent debts. While Chapter 7 bankruptcy allows consumers to keep some of their personal assets up to certain limits, consumers typically choose this type of bankruptcy when they don’t have many assets to protect. Chapter 7 bankruptcy can take three to six months to complete, but it does allow consumers to discharge delinquent debts and get a fresh start.

With Chapter 13 bankruptcy, consumer debts are restructured instead of discharged. Families and couples typically choose this type of bankruptcy because they have assets to protect, such as significant equity in their home. Once the Chapter 13 bankruptcy process begins, a court-approved debt repayment plan is set up and followed over three to five years. At the end of Chapter 13 bankruptcy, consumers will have been able to keep all their property and pay off unsecured debts included in their bankruptcy.

Are there limits to how often you can file bankruptcy?

While nobody dreams of filing bankruptcy someday, there are situations where bankruptcy is not only the best solution but the only way delinquent debts can be resolved. If someone finds they have an expensive medical condition and racks up hundreds of thousands of dollars in medical debt, for example, they may never pay those debts off through traditional means.

Because life can be messy, there are also times when it could make sense to file bankruptcy more than once. Maybe all your debts weren’t resolved the first time around, or perhaps you fell back on hard times after your first bankruptcy was complete. Filing for bankruptcy more than once may not be ideal, but it does happen.

According to Shawn M. Yesner of Yesner Law in Clearwater, Fla., you can file for bankruptcy as many times as you feel appropriate. However, you are only able to obtain a discharge of your debts in the new case if there was an adequate amount of time between each bankruptcy filing.

The designated “waiting limits” between each bankruptcy filing depend on the type of bankruptcy you last filed for as well as whether your previous case was successful or dismissed.

If the previous bankruptcy case was successful, then traditional waiting limits (which we’ll cover more below) apply. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) has prohibitions to prevent serial filers — or consumers who seek to file bankruptcy over and over — from taking advantage.

Yesner notes that under BAPCPA amendments, consumers who file for Chapter 7 or Chapter 13 bankruptcy within one year of having a bankruptcy case dismissed must prove in court why their new bankruptcy case will be successful when their last case was not.

If they successfully prove their case, then an automatic stay — a movement that prevents civil lawsuits and collections actions against you — may be granted. If a new bankruptcy case is filed within a year of two previous bankruptcy cases being dismissed, on the other hand, an automatic stay will not be granted right away.

Consumers may, however, ask the bankruptcy judge overseeing the case to impose the automatic stay for a specific length of time if they believe their situation warrants it.

If your previous bankruptcy was a Chapter 7

If you previously filed Chapter 7 bankruptcy successfully, this means you may have had some of your assets liquidated to pay off delinquent debts. You also had debts included in your bankruptcy discharged.

If you are in a position where you are once again struggling to repay delinquent debts, you must wait at least eight years before you can file for Chapter 7 bankruptcy again. Keep in mind, however, that the eight years begins from the original date of filing and not the original date of the first Chapter 7 bankruptcy discharge.

You may, however, file a Chapter 13 bankruptcy and receive a discharge after a successful Chapter 7 case after waiting only four years.

Yesner notes that occasionally you can file a motion for Chapter 13 bankruptcy sooner than four years after a Chapter 7 bankruptcy and that this scenario is a lot more common than people think. It’s so common, in fact, that attorneys have come up with a slang term to describe a Chapter 7 bankruptcy followed promptly by a Chapter 13 bankruptcy. This slang term, which is not really a type of bankruptcy at all, is called a “Chapter 20.” According to Yesner, some courts allow this type of case to proceed and others do not.

Yesner offered the following example to explain how he is helping a client in this exact situation:

“The debtor filed a Chapter 7 and discharged her credit card debt. The debtor also modified her home mortgage, but improperly believed that her second mortgage was wrapped into the modification of the first,” said Yesner. “Believing she only had to make one mortgage payment, she fell behind on her second mortgage and is too far behind to catch it up. In addition, the second mortgage company refuses to modify or work with her on a repayment plan.”

Yesner noted his client’s Chapter 7 bankruptcy was just over two years ago and she originally came to him when she found out the bank she had the second (delinquent) mortgage with was foreclosing on her home. He is now in the process helping his client file for Chapter 13 bankruptcy, which will force the bank to accept payments to catch up the loan over the 5-year term of the bankruptcy plan.

“The problem is that the debtor is not able to receive a discharge because her Chapter 7 was less than four years ago,” said Yesner. “However, we’re not using the Chapter 13 to discharge the debts; we’re using it to catch up her second mortgage.”

If your previous bankruptcy was a Chapter 13

If you successfully filed for Chapter 13 bankruptcy in the past, this means you had your debts restructured so you could pay them off over three to five years. This also means that you were able to keep your personal property throughout the bankruptcy process.

If you are in a position where you need to file bankruptcy again after a Chapter 13 bankruptcy, you will find that the waiting limits aren’t quite as severe.

According to Jay Fleischman, a consumer protection attorney with over 20 years of experience representing people in bankruptcy cases, you can file for Chapter 7 bankruptcy any time after a Chapter 13 bankruptcy provided your previous bankruptcy case resulted in you paying off all debts included in the case. The court may, however, allow another discharge if the old case paid at least 70% of your creditors and the new Chapter 13 plan was proposed in good faith and represents your best effort, said Fleischman.

If your Chapter 13 bankruptcy did not result in you meeting these requirements, then you must wait six years from the date of your Chapter 13 filing to file for Chapter 7 bankruptcy.

If you filed for Chapter 13 in the past, you are also eligible to receive a discharge in a Chapter 13 case as long as the first case was filed more than two years before the new one, noted Fleischman.

What to do if you think time limitations may apply in your case

If you have filed bankruptcy before and feel you may need to file again, you should consult a bankruptcy attorney who can walk you through your options and help you determine your best course of action.

“Most attorneys will provide a free initial consultation,” said Yesner. However, you should “make sure that the bankruptcy attorney you speak with also provides other non-bankruptcy solutions to prevent being forced to file when that solution may not be best or most appropriate for your finances.”

Before you meet with an attorney, it can help to gather some information on your previous bankruptcy. Create a file of paperwork of earlier bankruptcies that includes information on dates and debts discharged. Also, ask yourself about your goals. Do you want to eliminate debt? Save your home? Stop creditors from calling?

If you find you can’t file for bankruptcy again for several years, don’t despair. Fleischman said there might be other options to consider that could leave you better off. Depending on your reason for considering bankruptcy in the first place, those alternatives may include:

  • Dealing with creditors directly
  • Negotiating payment agreements
  • Settling debts
  • Engaging in administrative remedies such as income-driven repayment on federal student loans and offer in compromise for tax debts

“It’s a good idea to sit down with a lawyer who understands not only bankruptcy, but also legal issues presented by the types of debts you’re facing,” said Fleischman. “This will allow you to properly assess your situation and create a road map that will give you the best outcome.”