How many times can you claim bankruptcy?

Introduction

Bankruptcy is a legal process that allows individuals or businesses to eliminate or repay their debts under the protection of the court. It is often seen as a last resort for those facing overwhelming financial difficulties. However, the question arises: how many times can you claim bankruptcy? In this article, we will delve into the rules and limitations surrounding multiple bankruptcy filings.

Bankruptcy Types

Before discussing the frequency of bankruptcy filings, it is important to understand the different types of bankruptcy. The two most common types are Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy: Also known as liquidation bankruptcy, Chapter 7 allows individuals to discharge most of their debts by liquidating non-exempt assets. This process typically lasts a few months and offers a fresh start financially.

Chapter 13 Bankruptcy: Chapter 13 bankruptcy is a reorganization plan that allows individuals to repay their debts over a period of three to five years. This type of bankruptcy is suitable for those with a regular income who can afford to make monthly payments.

Frequency of Bankruptcy Filings

The frequency of bankruptcy filings depends on the type of bankruptcy previously filed and the time elapsed between filings. The rules vary depending on whether an individual has previously filed for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 to Chapter 7: If an individual has previously filed for Chapter 7 bankruptcy and received a discharge, they must wait eight years from the date of the previous filing before filing for Chapter 7 again. This means that once a Chapter 7 bankruptcy is successfully completed, another Chapter 7 filing cannot be made for eight years.

Chapter 7 to Chapter 13: If an individual has previously filed for Chapter 7 bankruptcy and received a discharge, they must wait four years from the date of the previous filing before filing for Chapter 13 bankruptcy. However, if the individual wants to file for Chapter 13 bankruptcy sooner, they may be eligible if they paid back at least 70% of their unsecured debts in the previous Chapter 7 case.

Chapter 13 to Chapter 13: If an individual has previously filed for Chapter 13 bankruptcy and received a discharge, they must wait two years from the date of the previous filing before filing for Chapter 13 again. However, if the individual wants to file for Chapter 13 bankruptcy sooner, they may be eligible if they paid back 100% of their unsecured debts in the previous Chapter 13 case.

Conclusion

In conclusion, the frequency of bankruptcy filings depends on the type of bankruptcy previously filed and the time elapsed between filings. Individuals who have previously filed for Chapter 7 bankruptcy must wait eight years before filing for Chapter 7 again, while those who have filed for Chapter 13 bankruptcy must wait two to four years before filing for Chapter 13 again. These rules are in place to prevent abuse of the bankruptcy system and encourage responsible financial behavior.

References

– United States Courts: www.uscourts.gov
– Internal Revenue Service: www.irs.gov
– Legal Information Institute: www.law.cornell.edu