Bankruptcy is divided into two main groups: personal bankruptcy versus business (corporate) bankruptcy.
Businesses are often legal entities that are incorporated and include limited liability corporations, S corporations, C corporations, and partnerships. If you are a small business owner, you may be wondering whether it would be better to file for personal bankruptcy or business bankruptcy.
Businesses can file under Chapter 7 or Chapter 11 Bankruptcy. Chapter 7 bankruptcy is for people who cannot and will not be able to repay their debt. Chapter 7 bankruptcy stays on your credit report for up to 10 years and you lose any property in your own name unless it is exempt. Notwithstanding, your debt is discharged. Chapter 11 bankruptcy is for business and corporations and allows them to either reorganize or liquidate their assets in order to repay debt.
Most individuals file either Chapter 7 or Chapter 13 bankruptcy. Chapter 13 bankruptcy is for individuals who still have income and can manage their debts. They form payment plans in order to repay their debts. Under a Chapter 13 bankruptcy, the debtor proposes to make installments to repay debt over a three to five year period. The remaining debt may be discharged.
Can I File for Bankruptcy More than Once?
If you have filed for bankruptcy before and received a discharge then the bankruptcy code specifies when you can file bankruptcy again and obtain a discharge. If you did not obtain discharge in your earlier bankruptcy then you can file for bankruptcy again without the waiting period You can file for bankruptcy two or even three times, even if you have received a discharge. You will often have to wait a certain period after you have filed for bankruptcy and obtained a discharge, to file for bankruptcy again and get a full discharge. If you file for bankruptcy prior the time limits then you will not get a full discharge.
When Can I File Again If I Have Already Filed for Bankruptcy?
Most persons file bankruptcy under the categories of either Chapter 7 (discharge) or Chapter 13(repayment plan). For persons who have already filed under either category, there are waiting times that must pass before the person can file for bankruptcy again. These can be different depending on the previous filing as well as the category of the newer filing.
Technically, there is actually no requirement for filing bankruptcy- the wait periods really only apply if there has been some discharge of debt in the previous filing. Thus, if a person files too early after a previous filing, they probably won’t be eligible for a discharge of debt the second time around.
This can be big setback, since most people file for bankruptcy to have their debts discharged or excused. Thus, it’s important to know the waiting periods when filing multiple times for a bankruptcy discharge.
What are the Wait Periods Associated with Repeat Bankruptcy Filings?
The wait periods for re-filing bankruptcy after a previous discharge are different depending on the current filing. If the person is filing successive claims under the same chapter, the wait periods are:
- Chapter 7: If you received a Chapter 7 discharge, you must wait at least 8 years from the filing date of the first claim in order to receive another Chapter 7 discharge
- Chapter 13: If your previous discharge was under Chapter 13 laws, you must wait 2 years from the date of the first claim in order to be eligible for another Chapter 13 discharge.
- Discharge under Chapter 13 followed by Chapter 7: You must wait 6 years from the date of the original Chapter 13 filing in order to obtain a discharge again under Chapter 7. There may be some exceptions to this rules, for example if you paid off all your creditors under the Chapter 13 plan, or if you paid at least 70% of the debt in a good faith efforts
- Discharge under Chapter 7 followed by Chapter 13 filing: You must wait 4 years from the date of the original Chapter 7 filing before you can obtain another discharge under Chapter 13.
These wait periods can become even more complicated under various situations. For example, suppose that you previously obtained a Chapter 7 discharge. If you apply for a Chapter 13 discharge, you would need to wait four years as stated above. However, in the event that a Chapter 13 application is denied, it is standard practice to convert the application into a Chapter 7 filing. In this case, since you already received a Chapter 7 discharge previously, the wait periods associated with successive Chapter 7 filings would kick in. This means that you’d have to wait a total of 8 years from the original filing.
Finally, these wait periods might not apply if you’re simply filing another bankruptcy claim under Chapter 13 or 7 but aren’t looking for a discharge of debts. This usually happens when a person files under Chapter 13 to pay off certain tax debts, even though they previously filed under Chapter 7.
How Often Can an Individual Get Their Debts Wiped Out?
Just as a business can file for bankruptcy multiple times, so can an individual, but she must be cognizant of timing. As stated above, someone who files for Chapter 7 bankruptcies cannot receive a second discharge of her debts within 8 years. If you received your first discharge of debt under a Chapter 13 bankruptcy, you cannot receive a second discharge within two years from the date the first case was filed. Nevertheless, if your first case was dismissed, or your discharge was denied, you are free to file for another Chapter 13 bankruptcy within 2 years.
What Do I Need to Do to Start the Bankruptcy Process?
The process for bankruptcy depends largely on what type of bankruptcy you’re filing. For Chapter 7 bankruptcy, you start by getting mandatory counseling from an agency that has been approved by the U.S. Trustee’s office in the six-month period prior to filing for bankruptcy. Then you need to file your petition with the bankruptcy court. After your paperwork is properly filed, the court will appoint a trustee to handle your bankruptcy proceeding, your eligibility for Chapter 7 filing is confirmed, and if you qualify, your debt is discharged.
Individuals filing for bankruptcy, regardless of Chapter, must complete a credit-counseling course and then petition the court for bankruptcy. Some types of businesses are exempt from the credit-counseling requirement; please consult an attorney for specifics. You must also file monthly operating reports with the court and submit a plan of repayment stating how you propose to treat each creditor. Once a judge approves the repayment plan, you must make payments to each creditor consistent with your plan.
Should I Hire a Bankruptcy Lawyer?
Filing for bankruptcy is a lengthy and complicated process. There are also several nuances in bankruptcy law. A licensed, skilled bankruptcy attorney can help you prepare your petition to discharge your debt. A qualified bankruptcy attorney in your area will be able to explain your options to you, especially if you are seeking a discharge of debts. Your lawyer can help prepare all the required paperwork and can represent you during formal court hearings.