There are all sorts of rumors floating around that concern those who are considering the possibility of filing personal bankruptcy. One of those many concerns is whether or not it is possible for a debtor to go bankrupt more than once. The answer is yes! The bankruptcy code allows for an individual to file bankruptcy more than once as long as a certain number of years have passed in between filings.
In 2005, Congress enacted the “Bankruptcy Abuse Prevention and Consumer Protection Act” which extended the time between filing Chapter 7 bankruptcy to what it is today: 8 years. Prior to that the time was 6 years. Chapter 7 bankruptcy is the most common type of personal bankruptcy filed today and it is typically beneficial for debtors with large amounts of unsecured debt and very little assets. Unsecured debts can be items such as credit cards, medical bills, or payday loans. If an individual qualifies for Chapter 7 bankruptcy then the process can be as simple as filing the necessary paperwork with the court, paying the filing fee, and attending the required “meeting of creditors” to be seen by the trustee. After the hearing the debtor will receive discharge papers in the mail notifying them that their bankruptcy was completed and successful.
The time between filing Chapter 13 bankruptcy is only 2 years, but to understand why it is so much shorter you should understand what all comes with filing Chapter 13. A Chapter 13 bankruptcy involves a 3-5 years repayment plan where a debtor is allowed to pay back a percentage of their overall debts with no interest. The amount that the debtor pays back is based upon their disposable income, which is ultimately how much money is left at the end of the month after all the necessary bills are paid. The Chapter 13 payment plan can last up to 60 months (5 years), but no longer. The hope for a debtor who files Chapter 13 is that by the end of their payment plan they will be debt free and caught up on all secured payments like vehicles and mortgage.
Ultimately the bankruptcy law does not hinder anyone from filing multiple times in a lifetime, but the 2005 changes were an effort to prevent abuse to the system. Filing bankruptcy is a constitutional right each of us are given in order to handle unexpected financial difficulty, but each time an individual goes bankrupt it should with the hope that a fresh financial future lies ahead. Bankruptcy should not be thought of as a quick fix you can use every 8 years to wipe away all of the credit cards you’ve recently maxed out. On the other hand the bankruptcy court understands that financial struggle can strike at any time, and it is never anything that is asked for. This is a great reason to find an affordable bankruptcy attorney and make sure to ask all of your bankruptcy questions and answers before filing so you can truly be prepared to take this risk.