The recession that began in 2008 was very severe because it was caused by excessive borrowing by households. As people became unable to repay their mortgages, they defaulted, leaving many homeowners underwater in their mortgages. The obvious response was a wave of bankruptcy filings. The recovery after the recession has not been particularly good, so it’s possible that many people will need to file bankruptcy again. The question debtors in this situation might be asking is, “Can I file again?” The answer depends on the chapter the previous discharge occurred in.
- For those who received a discharge in chapter 7, there is an eight-year window between the filing date of the first bankruptcy and another chapter 7 filing. If the subsequent filing is in chapter 13, the waiting time is only four years (the same four-year period before a chapter 13 case applies when the first bankruptcy was in chapter 11). The bankruptcy code treats the two situations differently because chapter 7 is a straight discharge of all one’s debts while chapter 13 the debtor repays a portion of his or her debts to the creditors.
- When the previous discharge was in chapter 13, the rules are a little more generous if complicated. A chapter 7 filing can occur six years after the chapter 13 discharge unless the debtor repaid 100 percent of the debt in the first bankruptcy’s repayment plan or he or she repaid 70 percent of the debt and the repayment plan was proposed in good faith. In both those situations, there is no waiting period. However, a successive chapter 13 filing can result in a discharge two years after the discharge in chapter 13. Again, the reasoning is that debtors who repay some of their debts to their creditors are more deserving of another discharge than others, and chapter 13 requires completing a minimum three-year repayment plan.
Note that the length of the waiting period sometimes begins with the filing date of the first bankruptcy or the discharge date, depending on the circumstances. More importantly, these waiting periods are for the time it takes until another discharge is available. It’s still possible for people to file bankruptcy even though a discharge cannot be obtained. This is often done for strategic reasons, such as using the automatic stay to halt a foreclosure or collections proceedings, or stripping a lien from an underwater secondary mortgage.
As always, the credit bureaus keep a bankruptcy filing on debtors’ credit reports for ten years. Successive filings will reduce people’s credit scores, and creditors will figure out when people are repeat bankruptcy filers and lend (or choose not to) accordingly. Consult with an experienced New York bankruptcy lawyer before considering a bankruptcy filing after having already done one recently.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney New York Bruce Weiner for a free initial consultation.
