How Bad Is It to File Bankruptcy Twice?

A personal bankruptcy filing offers individuals a structured approach to manage overwhelming debt, providing a financial fresh start. While bankruptcy offers relief, regulations for repeat filings are specific and require careful consideration. Understanding these rules is important for anyone contemplating a subsequent bankruptcy.

Eligibility Rules for a Second Bankruptcy Filing

Individuals considering a second bankruptcy filing must navigate specific waiting periods to be eligible for another discharge of debts. These timeframes vary depending on the chapter of bankruptcy previously filed and the chapter intended for the new filing. Waiting periods are measured from the date the previous case was filed.

If a previous Chapter 7 bankruptcy resulted in a discharge, an individual must wait eight years from that filing date to receive a discharge in a new Chapter 7 case. If the intention is to file a Chapter 13 case after a Chapter 7 discharge, the waiting period is four years from the Chapter 7 filing date. This allows for a reorganization plan under Chapter 13 sooner than another Chapter 7 liquidation.

Conversely, if an individual received a discharge in a previous Chapter 13 bankruptcy, the waiting period to file another Chapter 13 case and receive a discharge is two years from the prior Chapter 13 filing date. For those seeking to file a Chapter 7 case after a Chapter 13 discharge, a six-year waiting period applies from the Chapter 13 filing date. An exception may exist if the previous Chapter 13 plan paid 100% of unsecured claims, or at least 70% in good faith.

These waiting periods primarily concern the ability to receive a discharge in the subsequent case. A prior case dismissed due to a debtor’s failure to comply with court orders or complete required payments may also impact subsequent filing eligibility, sometimes leading to a 180-day waiting period before refiling.

Discharge Rules for Debts in Subsequent Bankruptcies

Even when an individual meets the eligibility criteria for a second bankruptcy, the ability to discharge certain debts can be limited. The timing of the previous discharge directly influences which debts can be eliminated in the new case. This applies to debts incurred before the previous filing but not discharged, or new debts accumulated since.

A prior Chapter 7 discharge can affect the types of debts discharged in a subsequent Chapter 13 filing. While Chapter 13 generally offers a broader discharge than Chapter 7, this benefit is curtailed if a Chapter 7 discharge was received within four years of the Chapter 13 filing. In such a scenario, the Chapter 13 discharge may not eliminate debts typically non-dischargeable in a Chapter 7 case.

Similarly, a previous Chapter 13 discharge impacts a subsequent Chapter 7 filing. If a Chapter 13 discharge was granted within six years of a new Chapter 7 filing, the debtor may not be eligible for a discharge in the Chapter 7 case.

Certain types of debts are non-dischargeable regardless of the number of bankruptcy filings. These include recent tax obligations, domestic support obligations like child support and alimony, most student loans, and debts arising from fraud or willful and malicious injury. A second bankruptcy filing does not alter these limitations.

Navigating the Legal Process for a Repeat Filing

Filing for bankruptcy a second time introduces unique procedural considerations. One significant difference is the potential limitation or absence of the automatic stay, a legal injunction that typically halts most collection actions by creditors immediately upon filing.

If a prior bankruptcy case was dismissed within the year before a new filing, the automatic stay in the second case is limited to 30 days. This limitation, outlined in Section 362 of the U.S. Code, presumes the second filing might be in bad faith. To extend the stay, the debtor must file a motion and demonstrate to the court, with clear and convincing evidence, that the new case was filed in good faith.

If two or more bankruptcy cases were dismissed within the preceding year, the automatic stay might not go into effect at all upon the new filing. In such circumstances, the debtor must request the court to impose the stay, providing compelling proof of good faith. Without a court order, creditors can continue collection activities.

Repeat filings often attract increased scrutiny from the bankruptcy court, the trustee, and creditors. This heightened attention can lead to more detailed questioning during the Meeting of Creditors, where the debtor is examined under oath about their financial affairs. There is also a higher likelihood of objections to the discharge of debts or the confirmation of a repayment plan.

Credit Reporting of Multiple Bankruptcy Filings

Multiple bankruptcy filings are recorded on an individual’s credit report, each appearing for a specific duration. This provides a factual record of bankruptcy events to potential creditors and lenders. The type of bankruptcy filed determines how long it remains visible.

A Chapter 7 bankruptcy filing typically remains on a credit report for 10 years from its filing date. This entry serves as a historical record for credit evaluation.

In contrast, a Chapter 13 bankruptcy filing generally remains on a credit report for 7 years from its filing date. This shorter duration reflects the nature of Chapter 13, which involves a structured repayment plan over three to five years.

When an individual files multiple bankruptcies, each filing will appear on their credit report for its respective duration. A credit report can display more than one bankruptcy event concurrently if the filings occurred within overlapping reporting periods. For instance, a Chapter 7 filed eight years ago and a new Chapter 13 filed recently would both be visible.