What are the Rules for Filing for Bankruptcy Twice?

rules for filing for bankruptcy twice

Despite the myths and fears surrounding bankruptcy, people who have successfully filed for bankruptcy understand that it can be an excellent legal tool to help individuals and families get their financials back on track. But what happens if you are still struggling after bankruptcy? If the deficits that led to the original bankruptcy are still impacting your finances, you need to know the rules for filing for bankruptcy twice. While less common than a single filing, multiple bankruptcies do happen to some people. Here, we will discuss what you can expect, how the process will work, and common mistakes to avoid.

Time Limitations

The first thing to keep in mind is that there are specific time limitations. If you have previously filed for bankruptcy, you cannot file again “whenever you want.” In fact, when you can file again will depend on the type of bankruptcy you filed previously as well as the type of bankruptcy you plan to file now. Different timelines apply to different types of bankruptcies and even depend on the order in which they were filed. It should also be noted that these time limitations begin from the date you last filed.

Most individuals file for bankruptcy under Chapter 7 or Chapter 13. A chapter 7 bankruptcy liquidates all debt. Approval is dependent on specific income requirements. Chapter 13 bankruptcy is a reorganization of your debt to create a more manageable repayment plan. In NJ, you can only file for Chapter 7 bankruptcy once every eight years. However, the rules are more lenient with Chapter 13 bankruptcy. NJ residents are allowed to file for Chapter 13 bankruptcy every two years. In order to file for a second Chapter 13 bankruptcy, you will need to prove you can afford the proposed repayment plan.

Exceptions

After filing for bankruptcy under Chapter 7, you must wait at least four years before you can file for a subsequent Chapter 13 bankruptcy. If you have filed Chapter 13 bankruptcy, you will need to wait six years before you are eligible to file for Chapter 7 bankruptcy, except in the below situations:

  1. You filed for Chapter 13 bankruptcy and 100% of your unsecured debt was paid.
  2. When you filed for Chapter 13 bankruptcy, at least 70% of your unsecured debt was paid, the bankruptcy was negotiated in “good faith,” AND you can prove you made a dedicated effort to paying off your debts.

The outcome of your previous case will also impact your current bankruptcy filing. If your previous case was dismissed before it could be successfully discharged, you will be able to file again. The time frame for when you can file again will depend on the reason for the dismissal. If you were dismissed because of failure to obey a court order, failure to appear in court, or due to a voluntary discharge, you will need to wait 180 days before you file again.

Automatic Stay

Filing for a subsequent bankruptcy will also change the way automatic stay works with your case. Normally, an order of automatic stay from the court will block all actions by creditors against you for the entirety of the bankruptcy process. If you file for a second bankruptcy after having a Chapter 7 or Chapter 13 case dismissed within the past year, the automatic stay will only be in effect for 30 days. This 30 day automatic stay can be extended in a Chapter 13 case – but only if you file specific paperwork with the court. The judge must approve this request and will likely only do so if you can prove that you’ve had a significant financial improvement in your life since the previous dismissal. If you have two bankruptcy cases dismissed within one year, there will be no automatic stay.

Getting the details right when it comes to the timing and other rules related to multiple bankruptcies can be difficult, but we are experienced in handling even the most complex of cases. Our team of bankruptcy experts is laser focused on helping clients make well-informed decisions that will ultimately result in a much-improved financial future. We will work with you to develop a customized bankruptcy plan that works best for your specific circumstances.

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