The Benefits of Filing Bankruptcy a Second or Third Time

There are many folks in the greater Sacramento area that haven fallen on hard times. Anyone who can empathize probably knows that it’s not always a one-time thing. That’s why, even though bankruptcy is supposed to be a fresh start, it doesn’t necessarily fix everything for the rest of time. Because of this reality, many consumers end up having to file bankruptcy more than once.

While there is technically no limit to the number of bankruptcy cases that a person can file, there are limits that are important to know. If not enough time has elapsed between bankruptcy filings, the debtor may not be able to get that all-important discharge.

Here are the basic rules. A debtor must allow eight years between Chapter 7s, two years between Chapter 13s, four years between a Chapter 7 and a Chapter 13, and six years between a Chapter 13 and a Chapter 7 (if the plan pays less than 70 percent to unsecured creditors). These times are calculated from filing to filing, not from first discharge to second filing.

Based on the fact that a consumer can file as many bankruptcies as she wants, but the discharges are limited, one might wonder why a debtor would want to file in these situations. The reasons vary.

If not enough time has elapsed, but a consumer still wants to eliminate their debt in a Chapter 7 by liquidating their assets, filing a Chapter 7 might be a good idea. It’s possible that a debtor has an asset that is “unwieldy” like a lawsuit or insurance claim and wants to use that to pay off creditors. By filing another Chapter 7, the trustee would be able to liquidate that asset to pay off debts. Although the debtor might not get the full value of the asset since the trustee’s interest is only paying off the creditors, it might be worth it so the debtor can sleep at night by not having to deal with the asset and having the trustee convert it into dollars. It could potentially save a big hassle.

In another example, a debtor may have recently filed a Chapter 7 and has remaining non-dischargeable student loans or taxes or even an auto loan. The debtor could file a Chapter 13 immediately following the Chapter 7. This would make those remaining debts a little more manageable and protect the consumer from lawsuits, garnishments and levies for five whole years. Depending on the time frame, the debtor may even be eligible for another discharge at the end of the Chapter 13 if they file yet another Chapter 13.

Anyone who has gone through bankruptcy knows that it can be more complicated than it sounds. But that is why it is essential to have an experienced and knowledgeable bankruptcy law firm. The moral of the story is: don’t give up on bankruptcy relief just because not enough time has passed. With some planning and a good, and a local lawyer on your side, the relief you so desperately need might be possible.