How Often Can You File Bankruptcy? Everything to Know
It’s easy to feel overwhelmed by debt and financial obligations and when you do, you can’t help but start to think about filing for bankruptcy. In 2018 alone, courts heard more than 770,000 bankruptcy cases.
Though many of those individuals filed for the first time, some were filing for the second or third time. This is both legal and, in some cases, can be a sound financial decision.
But that doesn’t mean you can file for bankruptcy whenever things get tough.
So, how often can you file bankruptcy to discharge your debts? Here’s what you need to know.
Understanding the Types of Bankruptcy
For individuals and families struggling with financial hardship, there are two main types of bankruptcies: Chapter 7 and Chapter 13.
A Chapter 7 bankruptcy is essentially a request for the court to forgive your debts entirely. If approved, you’ll be able to walk away from any outstanding credit card debt, loans, or other financial burdens.
This is ideal for individuals who just want to be able to start over. However, you’ll also likely lose most of your personal property. This is because the court uses that property to help offset the financial loss your creditors face when you walk away from those debts.
Chapter 13 bankruptcy provides you with partial debt forgiveness. If the court accepts your case, they’ll help you create a payment plan to repay some of your debts while forgiving whatever’s left at the end of the payment plan.
Every case is different. The court decides the payments you’ll have based on your financial situation, total debt, and the information you disclose to the court.
Each Type Serves Different Purposes
When most people think of bankruptcy, they think of full and complete debt forgiveness. This is because Chapter 7 cases are the most common. That doesn’t mean that Chapter 13 isn’t a great choice for some families.
The only way to decide which option is the best for your needs is to speak with a bankruptcy attorney. They’ll be able to assess your debts and your financial situation.
How Often Can You File Bankruptcy Under Chapter 7?
When you file under Chapter 7, you’re not permitted to file for another Chapter 7 bankruptcy for at least eight years. This is because ALL of your debts get forgiven and the court doesn’t want people to take advantage of that debt forgiveness just because they don’t feel like making payments.
But that doesn’t mean you can’t file for a Chapter 13 bankruptcy if you’re in a tight financial situation. You just have to wait four years after your debts got forgiven through your first Chapter 7 filing.
How Often Can You File Under Chapter 13?
When you file for bankruptcy under Chapter 13 and successfully finish your payment plan, you can’t file another Chapter 13 case for two years.
The restrictions are more lenient because you’re making a good-faith effort to repay as much of the debt as you can. The court doesn’t want to punish you for financial situations outside your control and wants to reward you for doing your part to repay your debts.
That said, there may come a time when filing a Chapter 13 bankruptcy just isn’t enough to eliminate your financial hardships. For families who filed Chapter 13 in the past and are considering filing a Chapter 7 bankruptcy, you’ll have to wait six years between filings.
Dismissal Can Influence Filing Frequency
Cases get dismissed all the time. This can be due to missing eligibility requirements or even failing to make it to court when you’re supposed to.
In most cases, the dismissal is a result of an error rather than any judgment on whether you deserve to have debts forgiven. When this happens, you’ll need to refile for bankruptcy to continue the process.
If the court simply dismisses the case, you can refile immediately. Sometimes, courts render the case dismissed with prejudice, which changes your ability to file.
A dismissal with prejudice occurs when you willfully ignore court orders or ask for the case to get dismissed. And when it does, you won’t be able to file a new case for bankruptcy, regardless of type, for at least 180 days.
As long as you’re not committing bankruptcy fraud and are doing everything you can to represent your situation honestly, you should be fine.
When Is It Right to File for Bankruptcy More Than Once?
Filing bankruptcy, regardless of the type, has major implications for your personal finances. Yes, your debt will get forgiven, but the process will cause your credit score to drop.
Worse, Chapter 7 bankruptcies stay on your credit report for 10 years after you file. This makes it hard to qualify for loans, open new credit cards, and can even hurt your ability to get into certain rental homes.
That said, there will be times when filing for bankruptcy more than once makes sense. If you find yourself completely unable to handle your expenses and debts, bankruptcy may be the best choice.
But if there’s any way to avoid filing for bankruptcy, do it.
What Can You Do to Avoid It?
Let’s say you’re struggling financially and aren’t able to file for bankruptcy again because you just had your debts removed two years ago. There’s always something you can do.
Debt settlement and consolidation programs can help you avoid bankruptcy while reducing your total debts so you can afford to pay them off. The process takes more time, but it won’t hurt your overall finances in the same way.
You won’t have to worry about giving up your home, your car, or have to deal with a bankruptcy on your record for another 10 years.
Speak with a Debt Expert Today
If you’re worried about your current financial situation and have been asking others “how often can you file bankruptcy,” take a deep breath. Bankruptcy isn’t your only option and if you’ve filed in the past, you know how much of a hassle it can be.
Save yourself the stress and reach out to our dedicated debt experts. We’ll help you figure out which debts qualify for settlement and consolidation and can coach you toward a better and brighter financial future.