Bankruptcy is the legal process in which a person declares themselves unable to pay back the outstanding debts that they owe. There are basically two types of bankruptcy: business or corporate bankruptcy, and personal bankruptcy. Either way, bankruptcy is seen as a means to a clean financial slate.
Businesses are often incorporated legal entities. This includes limited liability corporations (LLCs), S corporations, C corporations, and general partnerships. Should a business find themselves in need of bankruptcy filing, they can file a Chapter Seven or a Chapter Eleven:
- Chapter Seven Bankruptcy: A Chapter Seven bankruptcy, for businesses, ends in the entity being dissolved instead of reorganized, because there is no way the business can pay back what it owes.
- This type of bankruptcy stays on your credit report for up to ten years, and any property in your name is forfeited, unless it is exempt. However, the end result is still having your debt discharged.
- Chapter Eleven Bankruptcy: A Chapter Eleven bankruptcy is for those businesses who are still able to reorganize or liquidate their assets in order to repay their debts.
- The business is allowed to propose their own solution, but after a certain amount of time, the creditors are also allowed to suggest plans for reorganization. Further, the creditors vote to approve whatever final plan is chosen.
Most individuals filing for bankruptcy are going to choose either a Chapter Seven or a Chapter Thirteen. A Chapter Seven is for those who have little means to pay back what they owe. A Chapter Thirteen bankruptcy filing is for those who could pay back their debts if they were allowed a payment plan. Chapter Thirteen bankruptcy is for the struggling, but not totally destitute. These individuals still have income and can manage their debts with some help.
The biggest difference between business bankruptcy and personal bankruptcy is the means test. This test determines if the debtor has the means to repay the creditor. To determine eligibility for a Chapter Seven or a Thirteen, individuals must participate in a bankruptcy means test. Businesses, however, do not need to do this for a Chapter Eleven.
Another main difference is that businesses are able to cancel their contracts with creditors, if it is in the best financial interest of both parties to do so; individuals do not have this option for their debts, such as student loans and other types of debts that are exempt from bankruptcy.
Can I File for Bankruptcy More Than Once?
Yes, you can file for more than one bankruptcy. However, there are several rules you’ll need to know about and understand, and a lot of it is dependent on the type of bankruptcy you filed. Additionally, changes were made in 2005 to the Bankruptcy Code that dictate the time you will have to wait in between filings.
If your Chapter Seven (discharge) case has received a discharge of debts, you will have to wait eight years before filing for a second Chapter Seven bankruptcy. If you have received a discharge in a Chapter Thirteen (repayment plan), you cannot file a Chapter Seven bankruptcy for six years after filing the Chapter Seven. This applies to businesses as well as individuals.
There are other timelines between filing bankruptcies that apply to subsequent Chapter Thirteen cases. Additionally, time limits do not apply if your Chapter Thirteen discharge was received in good faith, meaning at least 70% of your unsecured debts have been paid. If a person were to file too early after their previous filing, they probably will not be eligible for a discharge of debt, or at least not a full discharge.
These waiting periods may not apply if you’re simply filing another Chapter Thirteen or Seven bankruptcy claim, but aren’t looking for a discharge of debts. This would be the case if, for example, a person files under Chapter Thirteen to pay off specific tax debts when previously filing under Chapter Seven.
Most people are filing for bankruptcy to have their debts discharged or excused, so it is important to be aware of the different waiting periods when filing more than once for a bankruptcy discharge.
How Do I Start the Bankruptcy Process?
A Chapter Seven bankruptcy begins by receiving mandatory consumer credit counseling from a U.S. Trustee’s Office approved agency. This needs to be completed in the first six months prior to filing for bankruptcy.
Then, the petition is filed with the bankruptcy court. Once all paperwork is properly filed, a trustee is appointed to your proceeding. Your Chapter Seven filing eligibility is confirmed, and your debt is discharged if you qualify.
Regardless of chapter, all individuals filing for bankruptcy are required to complete a credit counseling course, then petition the court for bankruptcy. Some types of businesses are exempt from the counseling stipulation.
Additionally, you must file monthly operating reports with the court, and submit a repayment plan. This plan must state how you intend to treat each creditor you owe. Once the plan is approved by a judge, you will need to make consistent payments to each creditor.
Should I Hire a Bankruptcy Attorney if I Want to File for Bankruptcy More than Once?
Bankruptcy filing is a lengthy, complicated process. There are many requirements and timelines to be considered. A qualified and knowledgeable bankruptcy attorney will ensure that all paperwork is filed correctly, prepare your petition to discharge your debt, and explain all of your options to you.
If you are filing for an additional bankruptcy, an experienced bankruptcy attorney will ensure the proper amount of time has passed before filing again. Because of all that is involved in a bankruptcy case, it is in your best interest to hire an attorney to guide you through the process.