How Often Can You File a Bankruptcy? Understanding the Frequency and Implications

Filing for bankruptcy is a significant financial decision, often viewed as a last resort for those overwhelmed by debt. But what happens after you’ve filed once? How often can you file a bankruptcy? This is a crucial question for individuals facing ongoing financial difficulties. In this blog, we’ll explore the specifics of filing bankruptcy, focusing on the two most common types—Chapter 7 and Chapter 13. We’ll also discuss the implications of repeated filings, the waiting periods involved, and the impact on your financial future.

Understanding the Basics of Bankruptcy

Before diving into the specifics of how often you can file bankruptcy, it’s essential to understand the basics of the two primary types: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy: An Overview

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” involves selling non-exempt assets to pay off creditors. It’s a quicker process compared to Chapter 13 and is usually completed within a few months. Most unsecured debts, like credit card debt and medical bills, are discharged, providing a fresh start for the filer.

However, filing for Chapter 7 isn’t without consequences. It significantly impacts your credit score and remains on your credit report for up to 10 years. Additionally, not everyone qualifies for Chapter 7; you must pass the means test, which assesses your income and financial situation.

How Often Can You File Bankruptcy Chapter 7?

If you’ve previously filed for Chapter 7 bankruptcy, you may be wondering when you can file again if the need arises. The waiting period between Chapter 7 filings is a critical aspect to consider.

Time Restrictions for Chapter 7

The U.S. Bankruptcy Code stipulates that if you’ve received a discharge under Chapter 7, you must wait eight years from the date of your previous filing before you can file for Chapter 7 again. This waiting period is designed to prevent abuse of the bankruptcy system and encourage individuals to make significant efforts to improve their financial situation before seeking relief again.

Impact on Credit

Filing for Chapter 7 more than once can have severe consequences on your credit score. A Chapter 7 bankruptcy remains on your credit report for up to 10 years, making it difficult to obtain new credit, loans, or even housing. It’s essential to consider these long-term impacts before deciding to file for bankruptcy again.

Considerations Before Filing Again

Before filing for Chapter 7 a second time, assess your financial situation carefully. Consider whether alternative solutions, like debt consolidation or negotiation with creditors, might be more appropriate. Also, keep in mind that repeated filings could lead to asset liquidation, potentially putting your home, car, or other valuable assets at risk.

Chapter 13 Bankruptcy: An Overview

Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” allows individuals to keep their property while repaying debts over a three to five-year period. This option is suitable for those with a steady income who can afford to make monthly payments to a bankruptcy trustee, who then distributes the funds to creditors. Unlike Chapter 7, Chapter 13 does not require asset liquidation, making it a preferred choice for individuals looking to retain their property.

How Often Can You File a Chapter 13 Bankruptcy?

Filing for Chapter 13 bankruptcy also comes with its own set of rules regarding frequency. Understanding these rules is crucial for those who may need to file more than once.

Time Restrictions for Chapter 13

Unlike Chapter 7, the waiting period between Chapter 13 filings is significantly shorter. You can file for Chapter 13 two years after a previous Chapter 13 discharge. This shorter waiting period allows individuals facing ongoing financial difficulties to seek relief sooner.

However, if you’ve previously filed for Chapter 7 and are considering filing for Chapter 13, the waiting period is four years from the date of your Chapter 7 filing. This combination of filings is known as a Chapter 20 bankruptcy, a strategy some individuals use to discharge unsecured debts under Chapter 7 and then reorganize remaining debts under Chapter 13.

Benefits of Multiple Chapter 13 Filings

One of the key benefits of Chapter 13 is its flexibility. Multiple filings may be necessary if you face new financial challenges after completing a previous plan. For instance, if you experience a job loss, medical emergency, or other unforeseen financial setbacks, filing for Chapter 13 again can help you restructure your debts while keeping your assets.

Credit Impact

Similar to Chapter 7, a Chapter 13 bankruptcy will appear on your credit report, but for seven years from the filing date. However, because Chapter 13 involves a repayment plan, it may be viewed more favorably by creditors compared to Chapter 7. Repeated filings, though, can still pose challenges when applying for credit, loans, or other financial products.

Factors Influencing Bankruptcy Refiling

Several factors influence how often you can file for bankruptcy and the success of subsequent filings. Understanding these factors is crucial for anyone considering multiple bankruptcies.

1. Type of Previous Bankruptcy

As mentioned earlier, the type of bankruptcy you’ve previously filed—whether Chapter 7 or Chapter 13—will determine the waiting period for subsequent filings.

2. Completion of Previous Plan

Successfully completing a Chapter 13 plan might shorten the waiting period for a Chapter 7 filing. Conversely, failing to complete a Chapter 13 plan could complicate future filings.

3. Good Faith Filing

Bankruptcy courts assess whether previous filings were made in good faith. If a court determines that a previous filing was fraudulent or abusive, it may impact your ability to refile. It’s essential to work with a bankruptcy attorney to ensure that your filings are in good faith and comply with all legal requirements.

4. Changes in Financial Circumstances

Significant changes in income or expenses can affect your eligibility for bankruptcy relief. For example, if your financial situation worsens after a previous filing, you may be eligible for a new bankruptcy case, provided you meet the necessary criteria.

Let’s Summarize…

How often can you file a bankruptcy? While there’s no strict limit on the number of times you can file for bankruptcy, the frequency of filing is governed by specific waiting periods and conditions. For Chapter 7, you must wait eight years between filings, while Chapter 13 allows for refiling after just two years. Understanding these rules is crucial for making informed decisions about your financial future.

Bankruptcy should be a carefully considered decision, and repeated filings can have long-term financial implications. It’s essential to explore alternatives, seek professional advice, and assess your financial situation before making any decisions. Remember, bankruptcy is not just a legal process but a significant step towards rebuilding your financial life.

Frequently Asked Questions

How often can you file bankruptcy in Illinois?

In Illinois, you can file for Chapter 7 bankruptcy every eight years and for Chapter 13 bankruptcy every two years.

How often can you file bankruptcy in Indiana?

In Indiana, the rules are the same: you can file for Chapter 7 bankruptcy every eight years and for Chapter 13 bankruptcy every two years.

How often can you file bankruptcy in Michigan?

In Michigan, you can file for Chapter 7 bankruptcy every eight years and for Chapter 13 bankruptcy every two years.

How often can you file bankruptcy in Georgia?

In Georgia, individuals can file for Chapter 7 bankruptcy every eight years and for Chapter 13 bankruptcy every two years.