While there are actually no restrictions when it comes to how many bankruptcy cases you are able to file if your debts have been discharged in bankruptcy, you will need to wait a certain amount of time before you are able to discharge debts again. Since the purpose of bankruptcy is to discharge debt this can be a tricky situation. As advised, you’ll always work with a bankruptcy attorney to ensure you are following the correct bankruptcy laws.
How Often Can You File For Bankruptcy?
Before you file for bankruptcy, it’s important to know what bankruptcy options exist for you.
Forms of Bankruptcy to Consider
If you’re facing large amounts of debt, have ruled out a workout or are not eligible for a workout, you will want to consider bankruptcy. You’ll also want to have an understanding of the types of bankruptcy available to you.
Most people have heard of Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Since Chapter 11 bankruptcy is usually for businesses, we’ll focus on Chapter 7 and Chapter 13. Please do not hesitate to contact us though, if you are interested in learning more about Chapter 11 bankruptcy, which is also known as “reorganization bankruptcy.”
Chapter 7 is the most common form of bankruptcy and is commonly referred to as “straight bankruptcy.” Under Chapter 7, assets are sold off so that the proceeds can go to paying debt. All proceeds from the sales of those assets are handed over to a trustee, who then pays down any and all creditors. After all creditors have been paid off they are no longer able to collect funds directly from you and your debts are cancelled, meaning you are no longer responsible for them. Chapter 7 is a good option for people dealing with the following:
- You unable to repay your debts
- You have debts that do not have co-signers
- You are going to be sued by creditors
Chapter 13 reorganizes debt so that you are able to pay back debts over the next three to five years. This pay-back plan is called a debt repayment schedule. Based on your income, and how much you owe, you’ll repay 10-100% of the debt you owe. Chapter 13 is a good option for people dealing with the following:
- You have already filed Chapter 7 within the past six years
- You have debts that have cosigners
- You are able to repay your debts within three to five years
- Your income has disqualified you from filing for Chapter 7
- You need relief from impending collection proceedings or you want to pay your creditors back but are currently unable to
How Often Can You Declare Bankruptcy?
Though it’s not advised to declare bankruptcy as often as you might want, unless a court has ordered otherwise, there are no restrictions for how many bankruptcy cases you are able to file.
There are certain time requirements for discharging debt though, which is the main function and reason for filing for bankruptcy. Your ability to file another bankruptcy and thus receive a discharge are dependent on these things:
- the type of bankruptcy you have previously filed
- the type of bankruptcy you are seeking to file
- how your previous bankruptcy was finalized: either through discharge, dismissal, or dismissal with prejudice
- when you previously filed.
Below we discuss some specifics of the above requirements.
Previously Filed Chapter 7 and Filing Chapter 7 Again
If you received a discharge in Chapter 7, you must will need to wait eight years from the date you filed that case before you can file another Chapter 7 and receive a discharge.** **
Previously Filed Chapter 13 and Filing Chapter 13 Again
If you received a discharge in Chapter 13, you will need to wait two years from the date you filed that case before you can file another Chapter 13 and receive a discharge.** **It usually takes three to five years for the repayment plan in a Chapter 13 to be discharged. Because of this, once your first Chapter 13 is closed, you can immediately be eligible for discharge in a second Chapter 13 filing.
Previously Filed Chapter 7 and Filing Chapter 13 Now
If you received a discharge in Chapter 7, you will need to wait four years from the date you filed that case before you can file Chapter 13.** **This is often called a “Chapter 20 bankruptcy” and can be effective for paying off priority debts or catching up on a missed mortgage.
Previously Filed Chapter 13 and Filing Chapter 7 Now
If you received a discharge from Chapter 13, you will need to wait six years from the date you filed that case before you filing Chapter 7. It should be noted that there is an exception to this rule. The six-year limit does not apply if, during the Chapter 13 you did the following:
- paid back all of your unsecured debts, or
- paid back at least 70% of unsecured debts and your plan was proposed in good faith and your best effort.** **
Dismissed with Prejudice Restrictions
A bankruptcy court can prohibit you from filing another bankruptcy case if the court dismisses your previous bankruptcy with prejudice. “Dismissed with Prejudice” typically means that you failed to obey the court’s orders or tried to abuse the bankruptcy system. If this happens, a bankruptcy court can prohibit you from filing for another bankruptcy for a longer period of time than those specified above. A court is also able to forever preclude you from discharging debts that might have been discharged in the case that was dismissed with prejudice.
Is Bankruptcy Bad?
You might have been told that filing for bankruptcy is a bad thing and that it can take years to recover, but in fact, bankruptcy can be exactly what you need to get back on your feet. You’ll still want to consider the pros and cons of filing.
Pros and Cons of Bankruptcy to Consider
As with any major decision in your life, there are pros and cons of filing bankruptcy. Below we discuss the advantages and disadvantages of filing for bankruptcy. As always, it’s advised you work with a phoenix chapter 7 bankruptcy lawyer that can help advise you.
Pros of Filing Bankruptcy
One immediate advantage that helps debtors when they file for bankruptcy is the “automatic stay.” This motion alerts creditors that they must stop their efforts to collect money from debtors. This stay is what stops creditors from calling you! Under an automatic stay, creditors are not allowed to call, send collection letters, file lawsuits, garnish wages, or seize assets, except for in specific situations such as the collection of alimony and child support payments.
The biggest “pro” of filing bankruptcy is that a court discharges your debts. That means that certain debts will not need to be repaid. This, of course, is dependent on the form of bankruptcy you file: either chapter 7 or chapter 13.
Cons of Filing Bankruptcy
One “con” of bankruptcy is that while it will discharge most debt, it does not discharge certain debt, such as mortgages, student loans, taxes, alimony, or child support. While student loan debt has been forgiven in extreme cases, for the most part, it is never discharged in bankruptcy. Additionally, a debtor can lose certain nonexempt property in a bankruptcy filing because a court orders it to be sold.
Bankruptcy will also have an affect on your credit score. While your credit might already be low because of delinquent payments, once a bankruptcy is filed, it’s required by the national credit reporting agencies that it appears on your credit report. A chapter 7 bankruptcy will stay on your credit report for 10 years and a chapter 13 will stay for 7 years.
The impact on your credit can hurt your future ability to qualify for a future loan or credit card. It might also affect your ability to be hired or secure living arrangements. Some employers and future landlords evaluate a persons credit score to determine if they are good candidates.
Working with a Bankruptcy Attorney
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 7 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
668 N. 44th St., Ste 320, Phoenix, AZ 85008