Most people have heard something about only being able to file a Bankruptcy every so many years. I generally hear seven (which is the Biblical time period (Deut. 15:1). Although, what most people are thinking of is the time between Chapter 7 filings, and that is currently eight years.
The truth, like with most things, is more complicated. I like to refer to the 2-4-6-8 rule. This assumes, by the way, that every case filed ends in a discharge. So, it is two years between a 13 followed by another 13 filing (although, you aren’t supposed to be able to complete a 13 plan in less than three years — hey, nobody every said the 2005 reform act made sense); four years between a 7 followed by a 13; six years between a 13 followed by a 7; and 8 years between two chapter 7’s.
So, I got a phone call this week from a man who has filed six Bankruptcies in the last 16 years. That doesn’t compute. First of all, only two of them were Chapter 7 cases. Second, to date, none of the 13 filings have completed and resulted in a discharge — so, they never triggered the relevant waiting periods.
What causes that kind of repeat filing? Despite what most people will assume, this kind of pattern generally includes a chronic health problem and at least a couple of periods of unemployment. Those two things manage to cause the accumulation of medical debt, and periods of missed mortgage payments either during illness or following a job loss. The four incomplete Chapter 13 filings will almost always be caused by job losses, because you can’t make plan payments without regular income.
So, what does this tell me when I pick up the phone and encounter a would-be client who clearly has a history with the Bankruptcy Court? The first thing I want to do is pull up his case history on the Court’s web site. I want to see what was filed, when, and what happened to it. Is he eligible for another filing, why did prior filings fail, have those problems been addressed, is there a compelling reason to try again? These are the questions I begin with.
For the would be client there are a number of concerns. First, is he eligible to refile? Even if he meets the 2-4-6-8 rule above, if his most recent case was dismissed with a bar against refiling for 180 days (sometimes improperly referred to as a dismissal with prejudice); then, he has to wait out that 180 day period even if he has an aggressive creditor snapping at his heels.
Second, if he has been a debtor in at least one bankruptcy case in the last year, then the automatic stay will only last for 30 days when the case is filed unless the Judge agrees to extend it. That requires notice to all creditors, an affidavit from the Debtor explaining why he should be given another chance; and possibly a hearing on the issue. If the would be client has been a debtor in two bankruptcy cases pending in the last year, then there will be no automatic stay at all unless the Judge agrees to impose one.
Third, the would be client is going to have to convince me that he is worth taking on as a client; and he can expect that I will require considerably more cash up front than I would otherwise. Of course, he may also have to convince the Court of his good faith if any annoyed creditor were to complain.
So, successive filings may be possible. Oh, and you are always eligible to file a Chapter 13, you just may not be eligible for a discharge at the end. The time periods above assume that the Debtor will need a discharge at the end of the case. Without it, the Debtor will need to find a way to pay 100% of his debt in the Chapter 13. That can be very useful, and a Chapter 7 filed with the intention of following it immediately with a Chapter 13 can be a very useful strategy for dealing with certain kinds of problems. Oh, that is called a Chapter 20, by the way; and I will blog about it another day.