It’s common for debtors in chapter 13 New York bankruptcy cases to face challenges completing their repayment plans. These challenges are frequently the same kind that bring them to bankruptcy in the first place: lost jobs, medical emergencies, or unexpected vehicle costs. Often, they take the options of asking the bankruptcy court to agree to a modification of their repayment plans, converting their cases to chapter 7, or asking for a hardship discharge. Another option they might consider is simply dismissing their cases and then refiling them, as if to start over. Here are the two most important issues to consider with this course of action.
One of the most important considerations is whether debtors can obtain a discharge at the end of case #2. Chapter 13 can be somewhat more forgiving than chapter 7 because the time period between filings that can result in a discharge is much smaller. A second chapter 7 case cannot end with a discharge unless it’s eight years after the first case, but for chapter 13, the interval is only two years. This means that a debtor who is close to completing a chapter 13 repayment plan, be it a three-year or five-year plan, can dismiss and refile a short time later with the intent of seeking a discharge. Debtors who dismiss their chapter 13 cases within two years of starting them, however, cannot refile in chapter 13 to obtain a discharge.
The next most important consideration is the automatic stay. The Bankruptcy Code does not look kindly on successive bankruptcy filings. Debtors who refile once (that is, case #2) within one year only get a 30-day automatic stay, and to gain a longer one, they must move the bankruptcy court to extend it. Once debtors file case #3 in one year, there is no automatic stay, and debtors must file a motion with the bankruptcy court and prove their filings aren’t abusive. In these situations, bankruptcy simply doesn’t prevent foreclosures or repossessions. The reason for this draconian measure is that some debtors were adding the names of family and friends to their real estate, and then they filed successive bankruptcies to thwart foreclosures.
So a debtor who’s considering a case #2 in chapter 13 has to ask whether it will result in a discharge and if it is sufficient to prevent a foreclosure. On these factors alone, a debtor (with advice from an experienced New York bankruptcy lawyer) might be able to make a decision. Other considerations might take precedence. For instance, the factors that caused the debtor to dismiss case #1—or others—might occur again. Here the debtor needs to seriously think about whether filing in chapter 7 or converting to it are better options.
If you are experiencing serious financial challenges, then talking to an experienced New York bankruptcy lawyer is the best step before deciding your course of action.
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 Brooklyn NY Bruce Weiner for a free initial consultation.
