How Often Can You File Bankruptcy? What If You Received a Discharge?

Filing for bankruptcy isn’t likely going to be your first option. If you’ve gotten to this juncture in life, it was probably one of the hardest decisions you’ve had to make thus far. But what happens if you find yourself in another sticky situation and don’t see any other option but to file again? Can you even file for bankruptcy two or more times? What if you received a discharge and need to file for bankruptcy again?  You likely have these questions and plenty more. Well, fear not. We’ve tasked our resident bankruptcy experts to answer your questions so you can proceed with confidence. 

What Are Bankruptcy Discharges?

First things first. To ensure that everyone is on the same page, let’s begin by discussing what a discharge actually is and what it does for you.  When you file for bankruptcy and receive a discharge, you are lawfully released from any debt that you may have previously had prior to filing for bankruptcy. When a discharge is issued to you, creditors may no longer pursue action against you for monies owed.  This is a permanent resolution, too, freeing you from the bondage of your current debt for good. Or at least, for the time being. Any new debt that you incur will be on you to pay. If you find yourself right back at square one with debt piling on and no feasible way to pay it off, you may be asking whether you can receive another discharge. 

Limitations to Discharges

While it’s true that you can file for bankruptcy as often as you like, there are limitations on discharges. You can indeed receive more than one discharge, but the frequency in which you receive them is far longer. Let’s assume that you filed for Chapter 7 bankruptcy two years ago and received a discharge. Debt has once again become insurmountable and you file for bankruptcy a second time. You may be surprised to find that the court immediately rejects your discharge. Why would this happen? In short, it was because you received a discharge within the last eight years, and law mandates that you cannot receive more than one discharge within an eight-year span. Those eight years begin from the moment that your last bankruptcy case was filed. So, yes, you can file for bankruptcy as often as necessary, but you will only be allowed to receive a discharge every eight years. The best way to avoid this potentiality is to make doubly sure that you don’t incur debt that you can’t afford to pay off. Of course, this is often easier said than done. What are you to do if you’ve already got more debt than you can handle? If you haven’t already received a discharge, how do you go about getting one so that your debt slate is wiped clean? Let’s have a look.

How to Get a Discharge

Aside from tax debt and student loans, just about any other debt can be discharged when you file a personal bankruptcy case. As long as you meet the qualifications for bankruptcy and have legal representation in doing so, there’s a very good likelihood that your debt can be discharged reasonably quickly. However, you must make absolutely sure that you are honest and forthright with the information that you submit to your attorney. Failure to do so will likely see your bankruptcy case denied and you won’t be able to get your debt discharged. Let’s take a moment to go over some of the things that can cause your case to be rejected by the courts.  Defrauding Sadly, many people attempt to hide their assets when they file for bankruptcy. Transferring your property or assets to someone else in an attempt to conceal them is a big problem. If there are legitimate transfers in the works when you file for bankruptcy, you need to make sure that you communicate these with your attorney so that there doesn’t appear to be defrauding on your end. Concealing Information Another quick way to get your case denied is to conceal data about your finances. To ensure that this doesn’t become a point of contention, do your best to organize all of your financial records into one, easy-to-access place.  The easier it is to pore over your financial statements, the smoother your bankruptcy case will go. Dishonesty Never, under any circumstances, make false statements to your attorney or the court. Doing so comes at a big price and could see you in jail as a result. Lose/Hide Assets When your assets mysteriously disappear and you can’t account for their loss, you’re putting your case in serious jeopardy. This is why it is so important to organize your financial statements. You don’t want to be in a situation where you can’t explain where your money has gone. Why does this matter? To the honest folk, it may not make much sense. But there are those who have tried to file for bankruptcy when they have a nest egg hidden away. This is fraudulent behavior and will bear the weight of the law accordingly. Failure to Comply When the courts order you to do something or submit critical information, you need to make sure that you follow their requests to the letter. Anything other than strict compliance can result in your case being thrown out. Failure to Attend Courses Filing for bankruptcy comes with an order to attend financial management and credit counseling courses. This ties in with the previous entry. If you don’t follow through with the court's request – in this case, not attending your courses – you will see serious repercussions.  That you have to attend these courses is a federal law, so you can imagine the penalty for trying to side-step your court order. If, however, you follow the court's wishes and are open and honest with your attorney, you should have a reasonably smooth bankruptcy case.

How Often Can You File for Bankruptcy?

We spoke earlier about how you can file for bankruptcy as often you need to. It’s the discharges that carry a waiting period. With that being said, there are ways that you can expedite the discharge process so that you don’t have to wait as long. For example, let’s assume that you previously filed for a Chapter 7 but are now filing for a Chapter 13. Unlike the eight-year period when filing for another Chapter 7, you would only have to wait half that time when filing for a Chapter 13, at just four years. Even if you don’t get your discharge, filing for Chapter 13 has its benefits. When you go this route, Chapter 13 lets you pay off your priority debts, such as new taxes that you’ve incurred. It’s also a good option if you need to focus your payments on your home mortgage or car loan. The decision to go from a Chapter 7 to a Chapter 13 is commonly known as Chapter 20 bankruptcy.  If you had previously filed for Chapter 13 bankruptcy and are filing for Chapter 13 again, the period of time that you would have to wait to be eligible for another discharge is only two years. This is because Chapter 13 bankruptcy includes a repayment system that usually concludes in three to five years. Oftentimes, you can file for Chapter 13 again and immediately be eligible for another discharge.  If you previously filed a Chapter 13 and are requesting to file for a Chapter 7, the period of time that you’ll have to wait for another discharge is six years. However, if you paid back all of your debt that was tied to the Chapter 13 bankruptcy, you won’t have to wait the standard six-year period. This means that you will have paid back any unsecured debt, or at least a minimum of 70% of it.

Summary

You certainly have some options when it comes to filing for bankruptcy and receiving a discharge. If you feel like you have reached the point of no return with your debt and bankruptcy appears to be the only way out, it’s important that you seek legal counsel. With the right attorney, you can get the direction you need to make the best decision. You don’t want to ever rush into bankruptcy without all of the necessary information. You may discover that there are better options available to you, so always explore all possibilities before proceeding.  It’s possible that getting a short-term loan or refinancing your mortgage could give you the financial freedom you need. If you’re unsure where to turn, we encourage you to explore our articles for more information on successful financial planning. Make sure to speak with a trusted attorney, too, as this will ensure that you receive the proper counsel for your financial needs. Sources https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics https://www.irs.gov/businesses/small-businesses-self-employed/chapter-7-bankruptcy-liquidation-under-the-bankruptcy-code https://www.insb.uscourts.gov/financial-management-course-requirement