Filing for bankruptcy is nobody’s first choice to get out of a financial problem, no matter how complicated or deep the problem might be.
However, in some cases, bankruptcy is the only option and you need to go through it. It may not be pretty or fun, but it can help you get your life back on track and recover from the financial problems over time.
So, what happens if you find yourself in dire straits again? Can you file for bankruptcy again? We asked experts at Chang & Diamond Bankruptcy Lawyer firm. Here’s what they had to say.
You Can, But There Might Be a Catch
There is nothing in the legal system of the US which limits the number of times you can go through bankruptcy. The law gives you as many chances as you need to get your finances right.
That being said, there may be some other limiting factors which will determine whether you can or can’t file for bankruptcy. In most cases, it is the time it has elapsed between your previous bankruptcy and the one you want to claim now.
If You Have Filed for Chapter 7 Before
Chapter 7 is a much faster, but more rigorous and direct type of bankruptcy. The majority of your possessions are sold off and the money given to your creditors. Also, a lot of debt can be written off, which is why a lot of people choose this type of bankruptcy.
However, if you have previously gone through Chapter 7 bankruptcy, this may affect your eligibility for any new bankruptcy case.
If you wish to file for Chapter 7 bankruptcy again, you need to make sure that at least eight years have gone by since you last filed. This goes for your second, third, and every other subsequent bankruptcy.
On the other hand, if you decide that Chapter 13 is better suited for your needs this time around, the legal waiting period is halved to 4 years.
If You Have Filed for Chapter 13 Before
On the other hand, Chapter 13 has a lot more to do with restructuring your debts than it has with forgiving them. Essentially, Chapter 13 is an agreement with your creditors to give you some time to consolidate your debts and to continue repaying them at a later date, in full.
If you wish to file for another Chapter 13 after the first bankruptcy, you will need to wait a minimum of two years. That being said, most Chapter 13 cases last somewhere between two and five years, which means that theoretically, you could file for a Chapter 13 right as your previous Chapter 13 contract expires.
If, however, you feel like Chapter 13 did not solve your problems, and you wish to file for Chapter 7, you will have to wait for a minimum of six years. If that sounds too long, there are some exceptions which might apply to you.
If you have repaid all of your debts from the Chapter 13 filing, you might be able to avoid the waiting period. Similarly, if you have paid off at least 70% of your debts in Chapter 13 and can prove that you had the good faith to repay it all in full, you might also be allowed to file for Chapter 7 faster.
All of these cases only apply if your previous bankruptcies went according to plan.
If, on the other hand, your previous case was dismissed on prejudice, there might be some additional restrictions for you. That means that you either disobeyed the decisions of the courts, or you hid your assets from your creditors and the court. These situations may warrant some penalties.
You might need to consult a bankruptcy attorney for the full list, but you might be banned from ever filing for bankruptcy again, or simply not allowed to discharge any additional debt.