For persons facing financial hardships, bankruptcy can be a critical decision. It is a court-supervised process where an individual lawfully declares themself incapable of paying outstanding debts and is generally the only means through which a person can lay down their burden and ease their overwhelming financial stress. However, if you have ever filed for bankruptcy before, it is essential to understand whether you can file it again and when you are eligible for the next filing. There are various things to consider as you think about filing for bankruptcy again. Read on to know how many times you can declare bankruptcy in California.
The Number of Times You Can File for Bankruptcy In California
Before knowing how many times you can declare that you are bankrupt in California, you need first to understand the available types of personal bankruptcies. They are two - Chapter 13 and Chapter 7 bankruptcy.
Chapter 13 bankruptcy is also known as a wage earner's plan and it does not discharge your debt right way but rather at the end of the 3-to-5-year payment plan. It allows you to create a more practical repayment plan to help you retain your property and continue paying off certain of your debts. The repayment plan will only work when you have enough income to pay the certain debt on your new plan.
Chapter 7 bankruptcy is usually also called liquidation bankruptcy. Filing bankruptcy under this chapter will see most of your debts being wiped out through the bankruptcy discharge within 3 to 4 months. But not all of your debts will be discharged when you file a Chapter 7 bankruptcy. Child support, various tax debts, and student loans are some of the debts that are not eliminated under a Chapter 7 bankruptcy.
How Discharge Works In Bankruptcy
The order to discharge your debts marks the completion of your bankruptcy process. The bankruptcy court order approves and issues this order for discharge. A bankruptcy discharge is essential since it marks the completion of your obligation under Chapter 7 and signals the end of your repayment plan under Chapter 13.
After the debt is discharged, creditors are not allowed to come after you to collect, meaning that they cannot send letters, come to your door, or make threatening phone calls demanding payment.
Should you file for bankruptcy, but the court never grants discharge, your case will simply be dismissed, and your debts will remain intact. This may occur if your bankruptcy is not filed in compliance with laws or you change your mind. That is why it is essential to hire a skilled attorney to assist you in handling the process from beginning to end.
Note that the date the court entered a discharge in the previous case is completely irrelevant. The date you filed the last case is the one that starts the clock for the next bankruptcy filing. Also, remember if the previous case did not lead to a debt discharge, but the court rather dismissed it, there is no time frame for declaring bankruptcy again---unless specifically ordered by the Judge.
You Can Declare Bankruptcy Many Times
When it comes to the number of times you can declare bankruptcy, the bankruptcy law does not provide a limit, regardless of whether or not you have received a bankruptcy discharge before. Unless you require another debt discharge, you need not wait to bring another bankruptcy case— you can declare bankruptcy again right after your previous case is closed. At times, there exist valid reasons to do so.
However, usually, the point of concern is whether you can obtain a debt discharge or not in your new bankruptcy filing. Obtaining a debt discharge is usually, though not always, the main reason for declaring bankruptcy.
So here is how it works if you wish to obtain a debt discharge through bankruptcy filing: If you wish to declare that you are bankrupt again after previously filing and receiving a discharge, you will be required to wait for a given period before filing to have your debt discharged fully. Should you declare you are bankrupt before the said period passes, you will likely not be granted a full debt discharge.
Your capability to declare bankruptcy again and therefore be granted a discharge depends on the following factors:
Under what chapter did you file for bankruptcy before?
Under what chapter do you wish to file for bankruptcy now?
How the court finalized your prior bankruptcy case— either through dismissal, dismissal with prejudice, or discharge
When you last filed
Consider this illustration of how you may file for bankruptcy multiple times: You may file for bankruptcy under Chapter 7 to wipe out many of your unsecured debts. Somewhere along the way, you may file bankruptcy under Chapter 13, which would enable you to lower given payments, wipe out a second home loan, pay off given debts faster than without bankruptcy filing, and remove all junior liens.
Converted bankruptcy cases: if you originally filed your previous case under one chapter and then converted it to another chapter, many courts would use the original (pre-conversion) filing date to determine the time limit. However, this is not a clear legal issue currently and could also vary based on the chapter under which you wish to file your new case.
How Often You Can Declare Bankruptcy
The following is the guide on how often you as a person (not a partnership or corporation) will need to wait after declaring bankruptcy to bring another bankruptcy case in court if you wish to obtain a debt discharge:
Previously filed a Chapter 13 bankruptcy and now filing a Chapter 7 bankruptcy. If you obtain a discharge under a Chapter 13 bankruptcy, you have to wait six years from when you filed the previous case to file a Chapter 7 bankruptcy. But this six-year period will not apply if, during your Chapter 13 bankruptcy, you:
Repaid all your unsecured debt
Repaid at least seventy percent of your unsecured debt, and your repayment plan was propounded in your best effort and good faith.
Previously filed a Chapter 7 bankruptcy and now filing under Chapter 13. If you obtained a discharge under a Chapter 7 bankruptcy, you have to wait four years from when you filed to go ahead with filing for Chapter 13 bankruptcy. This is usually known as a Chapter 20 bankruptcy. It can be the best option to help you catch up on a missed mortgage or pay priority debts.
Previously filed a Chapter 13 bankruptcy and now filing the same. If you declared bankruptcy under Chapter 13 and received a debt discharge, you have to wait two years from when you filed the case to file another bankruptcy case under Chapter 13 and obtain a discharge. Generally, it takes between three and five years to complete a Chapter 13 process. After your first bankruptcy filing period under Chapter 13 ends, you can qualify for a debt discharge under a second Chapter 13 declaration. You are not limited on the number of times you may declare bankruptcy under Chapter 13. Even when you currently do not qualify to file a Chapter 7 bankruptcy, you might find relief by filing a Chapter 13 bankruptcy.
You Previously Declared Chapter 7 and Declaring Bankruptcy Again Under Chapter 7. If your debts were discharged under a Chapter 7 bankruptcy, you have to wait eight years from when you filed your bankruptcy case to file for another bankruptcy case under Chapter 7 and receive a debt discharge. California law permits you to declare a Chapter 7 bankruptcy once every eight years.
For instance, if you declared bankruptcy under Chapter 7 on January 1st, 2022, and the court granted you a discharge, you must wait until January 2nd, 2030, to declare bankruptcy under Chapter 7.
When it comes to Chapter 11 bankruptcy, you can declare bankruptcy under this Chapter and obtain a debt discharge of any dischargeable debts at any time except if the bankruptcy will liquidate all your assets and you will not conduct any business after the plan’s consummation. If that is the case, the time limit requirements are similar to the Chapter 7 ones, as mentioned above.
What Happens Where a Bankruptcy Court Dismisses Your Case with Prejudice Restrictions?
A court could bar you from filing for bankruptcy again if it dismissed your previous case with prejudice. ‘Dismissed with prejudice' generally means you tried abusing the state's bankruptcy system or failed to comply with the court's orders. If this happens, the bankruptcy court may bar you from declaring bankruptcy again for a more extended period than those stated above. The bankruptcy court can also forever preclude you from discharging debts that may have been discharged in the bankruptcy case that the court dismissed with prejudice.
Why Declare Bankruptcy Again If You Are Ineligible for a Debt Discharge?
Even when you are ineligible to receive a debt discharge, you still have reasons to declare bankruptcy again, especially under Chapter 13. You may ask what these reasons are. In bankruptcy, we have something called the automatic stay. This automatic stay prevents lenders from collecting during your bankruptcy case, and it still applies irrespective of your capability to discharge your debts.
How does this help? Imagine you have tax debt, and the internal Revenue Service (IRS) requires that you pay the debt fully within twenty-four months. By declaring Chapter 13 bankruptcy, you could stretch the tax debt payments over sixty months at 0% interest.
You can do the same thing with your student loan, but unlike particular taxes, student loans do not have to be paid one hundred percent during the sixty-month Chapter 13. Therefore, you may have to file numerous back-to-back Chapter 13 bankruptcies to continue receiving protection on your student loan payment.
Alternatively, suppose you have just filed for bankruptcy under Chapter 7 and received your debt discharge. However, you have a junior lien on your home that could be eliminated if you file for Chapter 13 bankruptcy. In this case, you could file Chapter 13 bankruptcy and eliminate the junior lien, although you will not be receiving a discharge (and you cannot eliminate these kinds of liens under Chapter 7 bankruptcy). This is what we termed above as a Chapter 20 bankruptcy.
These are all possibilities to talk over with an experienced and qualified bankruptcy attorney.
Strategy to Apply in a Second Bankruptcy Filing
If you are thinking about declaring bankruptcy again, you want to create a plan to ensure the process goes as smoothly as possible. The following are steps you should consider taking:
Find out whether there is another alternative to declaring bankruptcy again that will help you ease your debt burden. Consider all the debt relief options you have before declaring bankruptcy again.
Determine what kind of bankruptcy to declare the second time if there are no other available options
Research the repercussions of filing for bankruptcy again, for instance, whether you will lose your assets or how it will impact your credit
Opt whether to file for the second bankruptcy by yourself or seek a lawyer's help
Know the waiting period between your first bankruptcy and the second case you wish to file.
Find an Expert Modesto Bankruptcy Attorney Near Me
Can I declare bankruptcy again if I have done it before? The answer to this question is yes, and you can file for bankruptcy as many times as you have to within given time frames. If you are thinking about declaring bankruptcy and have done it before, you want to consult with an experienced bankruptcy lawyer. Various exceptions to the stipulated rules exist, and your lawyer can tell you if you are eligible.
At Modesto Bankruptcy Attorneys, we will assess your financial situation and advise whether you qualify for bankruptcy again and under what Chapter you would file. Serving the city of Modesto, we have helped several clients both in the city and beyond overcome financial hardships through bankruptcy. We will be pleased to meet you for a cost-free consultation and address all your concerns and questions regarding repeat bankruptcy filings. Call us today at 209-314-3010 for our help.