Business & Finance / How Many Times Can You File Bankruptcy

How Many Times Can You File Bankruptcy

What is bankruptcy?

This is a legal procedure under the federal law and administered by the federal court for bankruptcy, established to help debtors - those who are unable to recover debts to creditors - to clean up and start over their financial affairs.

Who initiates a bankruptcy case?

It can be a debtor - in this case it is a voluntary bankruptcy - and creditor, in which case we are dealing with a forced bankruptcy. The claim of insolvency is sent to the local federal court for bankruptcy - for example, under Chapter 13 of the bankruptcy legislation. By the way, there are only five options of bankruptcy, but personal bankruptcy is usually processed in accordance with Chapter 7 or Chapter 13 of the Code. It should be borne in mind that the filing by the debtor automatically protects his property from confiscation, and the debtor himself - from lawsuits by creditors.

What is the difference between the filing bankruptcy under Chapter 7 and Chapter 13?

In the case of filing bankruptcy under Chapter 7 the debtor's property is sold out and the resulting revenue is distributed among the creditors. Under Chapter 13 the debtor retains some flexibility to manage his own property, though is forced pay his creditors more generously. As a rule a person applying under Chapter 13 continues to receive regular income, which, however, at that time is not enough to cover the debt. Often these people are using bankruptcy to protect themselves from giving the house, purchased in installments, to the property of the mortgagee bank.

What happens after the filing bankruptcy under Chapter 7?

In the case of a petition under the Chapter 7 the creditors must be notified. After that, the main part of the debtor's property is transferred at the disposal of the trustee appointed by the court, which will ensure the sale of the property. Proceeds from the sale are distributed among creditors, and the share of each will depend on the relative share of the debt. This does not mean, however, that the lender can recover the entire amount of the debt because the debtor's property may be much more modest compared to the debt. The forthcoming distribution of property must be approved by the court.

How many times can you file bankruptcy?

From the technical side you can file bankruptcy as many times as you want, but not always get the wanted result, especially due the recent changes in law.

In a case of Chapter 7 a debtor cannot obtain a discharge1 if (a) a case of Chapter 7 was filed within the recent 8 years, (b) a case was filed within the recent 6 years. In either case the time periods are measured by the commencement dates of cases.

Do you need a lawyer in the case of bankruptcy?

The help of the lawyer is not necessary, but it is nevertheless more than welcome. Bankruptcy involves complex issues, and their decision could seriously affect your financial future. Therefore, these problems are much easier to solve with the assistance of a lawyer.

What are the main criteria for assessing whether or not to file bankruptcy?

It is not difficult to assess - define the proportion between your overall consumer debt and annual income. If this ratio is more than 25%, then the filing for bankruptcy is likely to be the best way out. Judge for yourself - depending on the amount of debt you may need ten or more years to pay for them. Let's say you are 45 years old, you have two teenage children, and you did not make contributions to a pension. In this situation, the bankruptcy at least will help you to save money for your current and future children spending.

What are the main positive aspects of filing bankruptcy?

The positive side is that the applicant's insolvency allows you to completely get rid of some debts. Normally the court forgives debts on credit cards, medical bills, unpaid bills for a car, rent arrears and utility bills. However, there are several types of debts that are not canceled by the court, like child support, alimony, education loans, unpaid taxes in the period designated by the court, monetary compensation or penalties (e.g., for driving while being drunk). Besides the financial advantages of bankruptcy, there are also purely emotional. Those who have gone through bankruptcy, remember what the feelings were accompanied by their appeal to the court and many annoying phone calls from creditors, and now are happy that all of that is behind.

What are the negative aspects of bankruptcy?

There are several of them. First of all, a record of bankruptcy will appear in your credit history and will remain there for ten years. Because of this, it will not be easy for you to get credit, especially in the first several years after the bankruptcy. On the other hand, if you already have problems with credit history - for example, because of previous overdue accounts or unpaid debts, the bankruptcy will not be worse for your credit history. Furthermore, even without filing bankruptcy, you still probably do not have large savings, and you will be able to contact the bank for a credit to buy a house at least only in a few years later - just as it would be if you have declared bankruptcy.

What is the basic idea of innovation being considered by Congress?

In the fact that, compared with the current laws, filing bankruptcy under Chapter 7, i.e. getting rid of debt, will be much harder and that payments to creditors under Chapter 13 will increase, and the terms of payment will be reduced. This is the main content of innovations, and more specific provisions will be made known, when the final text of the law is adopted. Today the Senate and House of Representatives are considering two different bill. The House of Representatives, in fact, has already approved its bill, but the Senate – not yet, and when it accepts it, then both bills will be submitted to the negotiation committee of the Congress to work out a compromise. Once the last option will be approved by both houses and signed by the president, the law will begin to function.
  1. Discharge - the injunction that acts to enforce the debts.
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