One of the most popular questions potential debtors want to know is how often they can file bankruptcy. What potential debtors should be asking is, “how many times can I file for bankruptcy AND receive a bankruptcy discharge”. You see you can file bankruptcy as many times as you want and may be considered a serial filer, but if you want to receive a discharge, meaning you will not be liable for paying your debts, you must wait certain time limits between filing your cases.
In general a debtor must wait 8 years between when they filed a chapter 7 bankruptcy case until they can file another chapter 7 bankruptcy case and receive a discharge. A debtor would also need to wait 4 years after filing chapter 7 bankruptcy to receive a discharge in a chapter 13 bankruptcy. Debtors can also receive a discharge after 2 years from when they filed a chapter 13 bankruptcy to filing another chapter 13 bankruptcy. With that said I have filed cases where a debtor received a discharge in Chapter 7 and then immediately after that case was closed, filed a chapter 13 to help a debtor retain their home to allow them to catch up on payments over 5 years which they were now able to do because all of their unsecured debt was eliminated. This strategy can be useful if you wan to eliminate your unsecured debts immediately and you qualify for chapter 7 bankruptcy. A chapter 13 bankruptcy can eliminate unsecured debts as well, however you most likely will not receive a discharge for 3 to 5 years after your case is filed.
So what if you file a bankruptcy case and don’t receive a discharge?
If you have filed a bankruptcy and your case is dismissed without a discharge for one reason or another, you may re-file your case and proceed to get a discharge. There are rules in place however to protect against serial filers who file multiple cases without proceeding to a discharge. This is often done by debtors to prevent a foreclosure on a home or stop a garnishment or lawsuit. When a debtor files for bankruptcy, something called the automatic stay goes into effect immediately which prevents creditors from collecting on a debt. The bankruptcy code Sections 362 (c)(3)&(4) were intended by Congress to limit the duration of the automatic stay afforded to serial filers in certain circumstances. Section 362 (c)(3) provides that if a debtor had one prior bankruptcy case dismissed in the preceding year, the automatic stay will terminate within 30 days after filing of the later (ie., second) case unless the debtor can convince the court to extend the automatic stay. For the automatic stay to be extended beyond said 30 days, the statute requires the debtor, during said time frame, to (1) file a motion to extend the automatic stay, (2) have the hearing on said motion held before the Court, and (3) convince the Court that there has been a substantial change in circumstances and good reason to believe that the debtor will carry the current case through to discharge. Section 362 (c)(4) provides that if a debtor had two or more bankruptcy cases dismissed in the preceding year, the automatic stay does not even go into effect upon the filing of the later ( ie., third) case. For the automatic stay to be imposed in this situation the debtor must file a motion with the bankruptcy court within 30 days of the later filing seeking to impose the automatic stay and convince the court that the latest filing is made in good faith. However, the statutory language employed by Congress to accomplish its intended goal has proven to be inapplicable to many serial filers, which is good news for debtors.
Most jurisdictions follow the majority opinion that all property of a debtor is part of the bankruptcy estate and is therefore protected by the automatic stay, even with regards to a serial filing. The automatic stay is terminated as to the actual debtor however and would not stop an eviction for instance. Unfortunately for those of us in the 9th circuit (applicable to Washington state filers), there is a case called In Re Reswick, 446 B.R. 362, 371–72 (B.A.P. 9th Cir. 2011), which found that Congress intended that the automatic stay to terminate as to all property despite how the bankruptcy code was written. So the moral of the story is you might want to consider filing a motion extending the automatic stay within 30 days of filing a second or third bankruptcy within a year to prevent any mortgage companies from getting relief from the automatic stay. With that said it is always advisable to file all of your schedules and information required in a chapter 13 bankruptcy to extend the amount of time that your case is active and give you the chance of having your case confirmed which may put you outside the scope of filing 2 or 3 cases within a year so that you do not find yourself in this in enviable position.
If you are able to extend your case and if a debtor does get their chapter 13 plan confirmed before the foreclosure auction sale occurs, the confirmed chapter 13 plan should bind the mortgage holder to the plan even though the automatic stay was never imposed. This is because when a chapter 13 bankruptcy plan is confirmed it is ordered by a bankruptcy judge that all parties subject to the plan, must abide by it, including secured creditors.
In my practice I have seen debtors serial file bankruptcy cases to prevent a foreclosure, often representing themselves, only to lose their home to a foreclosure sale because they were unaware of the serial filing rules and they thought if they keep filing a case, that will stop the foreclosure sale immediately. Don’t make that mistake. You should try to stay in your bankruptcy cases as long as possible and act in good faith by filing all of the required documents, not just file a voluntary petition to stop the sale thinking you can always file another case later.
As you can see the bankruptcy laws and cases that go with them can be complex. If you live in Washington state and have additional questions about the bankruptcy automatic stay or serial filing of bankruptcy cases, give Symmes Law Group a call at 206-682-7975 to learn about your options.