How Often Can You File for Bankruptcy?
Bankruptcy is seen as the ultimate last resort when you have mounting debts and can’t find the money to pay them. It’ll discharge most of those debts and allow you to make a fresh start, albeit with a host of disadvantages and all the stress that comes with hitting rock bottom.
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However, it’s not a “get out of jail free” card that you can use time and time again whenever you’re in above your head. In fact, if you have filed for bankruptcy and gone through the bankruptcy process once, then you will need to wait for several more years before you can repeat it.
The exact time you need to wait will depend on the bankruptcy code and a few other factors, all of which we will look at in this guide to repeat bankruptcy filings.
How Often Can You File for Bankruptcy?
Technically, you can file for bankruptcy as many times as you want. However, the court may conclude that you are abusing the process if you file many cases in a short space of time. What’s more you can only receive a bankruptcy discharge every so often. For Chapter 7 bankruptcy, you need to wait at least 8 years.
Things are a little more complicated with Chapter 13 as it takes between 3 and 5 years for a repayment plan to complete, but generally, you can receive another structured plan once this one has finished.
But what happens if you’re seeking a Chapter 7 discharge after Chapter 13, and vice versa? If you initially filed for Chapter 7, you can file for Chapter 13 just 4 years later, a whole 4 years less than the time you need for another Chapter 7. If you received a discharge through Chapter 13, you need to wait 6 years before getting one through Chapter 7.
There is an exception here, however, that doesn’t apply elsewhere. If, during Chapter 13, you repaid all your unsecured debt (credit cards, medical bills, private student loans) or repaid at least 70% in good faith, this rule won’t apply.
The discharge is the key here, because while there are very few restrictions on bankruptcy filings if a discharge is not received, you will need to wait at least a few years if it is. There are also additional rules if your bankruptcy case was dismissed “with prejudice”, in which case a limit will be placed on when you can file again.
What’s the Difference Between Chapter 13 and Chapter 7?
We have discussed this issue before in our guide to Chapter 13 vs Chapter 7. There are many differences, but generally it can all be boiled down to the following:
- The most common filing in the United States.
- Seeks to discharge all unsecured debts.
- Bankruptcy trustee liquidates most assets to repay creditors.
- Process takes fewer than 5 months to complete.
- Very few exemptions.
- Accounts for around a third of all filings.
- Creates a repayment plan with input from creditors.
- Process takes up to 5 years to complete
- Many exemptions, including property and car.
Note that we use the term “unsecured debt” when referring to a bankruptcy discharge. This covers credit card debt, personal loans, and anything else that is not secured against an asset. However, it does not cover tax debt or other federal debts and you’ll need to pay child support and alimony.
Secured debt is also not covered, as the lender will simply seek to recover their asset.
When Should You File for Bankruptcy?
Bankruptcy is not there to give you an easy escape from your obligations. Before filing for bankruptcy, a debtor must prove they have tried to repay their debts and haven’t simply given up at the first sign of difficultly. A bankruptcy case will only be successful if you can show that you have exhausted all other options and are left with no choice but to file for bankruptcy.
If you acquire any loans immediately before applying for bankruptcy, they may not be discharged, and if it’s discovered that you have fraudulently filed, either because you claimed something that was not true or concealed an asset, the trustee can revoke the bankruptcy discharge.
It can also be an expensive process. As discussed in our guide on The Total Cost of Bankruptcy, you may need to pay up to $4,000, covering filing fees, attorney fees, court fees, and credit counseling. It tends to be just $1,000 to $2,000 for Chapter 7, but in both cases, if there are any complications those attorney fees will increase, and it will begin to look decidedly less like a simple solution.
If you have already filed for bankruptcy in the past you will know all of this, but caution is still advised. Filing for bankruptcy means you have hit rock bottom and if you reach that point again it suggests you may have some serious financial issues.
In that case, what happens if you file for bankruptcy and then experience the same issues just 2 or 3 years down the line? A third filing won’t be an option, your bridges have been burnt, and you could find yourself with some serious issues.
Before you file, remember to:
- Try budgeting and try to repay your debts normally
- Speak with a credit counselor to find the root of your financial problems
- Understand what bankruptcy will and won’t discharge
- Exhaust all other options (debt settlement, debt consolidation, debt management)
- Speak with a bankruptcy lawyer
How Long do You Need to Wait?
The waiting periods discussed above begin when you file for bankruptcy, as opposed to the date that your debts are discharged. If you have any questions about the process, speak with a bankruptcy attorney. It can seem like a pointless expense when you can file yourself, but you’re much more likely to succeed with an attorney on your side and they can deal with the court and the trustee for you, making it a much less stressful process.
Both Chapter 7 and Chapter 13 cover personal bankruptcy filings, but there are a few other codes as well, including Chapter 11 and Chapter 12, which cover businesses. With these, there is no waiting period for a discharge, but you will have to wait between 4 and 8 years after filing for Chapter 11/12 before you can file for 7 or 13.
How Long After Filing Can You Get Credit?
A bankruptcy can remain on your credit report for up to 10 years. However, you don’t need to wait a decade before you can start applying for credit again. Technically, you can apply straight away, but we wouldn’t recommend it. Your credit report will be in tatters and you’ll be offered only high-interest loans and cards.
Instead, keep a close eye on your credit report and wait for everything to update with details of the bankruptcy, which should occur between 2 and 3 months after filing. Your score will begin to gradually (and slowly) improve from there.
You can start looking for new credit right away, just remember that time is a great healer when it comes to credit and the stronger your credit score is, the better your opportunities will be.
If all your debts have just been discharged there should be very little need for another loan or credit card. If it’s simply about improving your score, then pick up a secured credit card or credit builder loan instead.
Alternatives to Repeat Bankruptcy Filings
If you’ve been through the bankruptcy process already, you’ll know how stressful it can be and how much damage it can do to your credit score. To save yourself from going through that process again, try the following debt relief options:
- Debt Consolidation: All your unsecured debt will be consolidated into one loan or credit card balance. The term may increase, especially with a debt consolidation loan, but you’ll pay less per month and there are options for debtors with bad credit.
- Debt Management: A form of debt consolidation whereby your debts and finances are handled by a third-party debt relief organization, often a credit counseling agency or credit union.
- Debt Settlement: A fast and cheap way to clear debt. It may result in a few derogatory marks, but debt settlement will ensure your debts are settled for much less than their total balance.
If you’re experiencing hardship, you can also simply contact your creditors and let them know. Many credit card companies have hardship programs and most lenders will offer you some kind of reprieve. They know what options you have available—they understand that if they refuse and make your situation worse, you can just file for bankruptcy or refuse to pay the debt.
They want to recuperate as much of their money as possible to avoid selling the debt to a collection agency. As a result, they are generally very receptive when it comes to negotiating debts. Speaking with your creditors should always be your first port of call when seeking to ease your financial burden.
Is it Difficult to File for Bankruptcy Again?
It shouldn’t be too difficult to file again, providing you have waited the required length of time. If anything, it will be easier the second time around as you have already gone through the process and know what to expect and how to prepare.
You may have your bankruptcy filing fees and documents prepared and know which attorney to contact. You’ll also be aware of what can and can’t be discharged and will understand how long the process will take.
Summary: Repeated Filings – Possible, but Not Always Preferable
As discussed in this guide, it is possible to file for bankruptcy multiple times. In fact, there is no limit to how many times you can receive discharges over the course of your lifetime and there is also no limit to how many filings you can make in any given period of time (providing they are dismissed and not discharged).
But the courts have a limited patience, you can be dismissed with prejudice, and if you’ve had your debts discharged, you need to wait a number of years. If you need any more information on this subject, check with our other articles on bankruptcy or speak with a bankruptcy attorney.
And whatever you do, always look at the alternatives before filing for bankruptcy, regardless of whether it’s your first, second, or fifth time. All hope is not lost and there are usually better options out there.