Imagine you file a Chapter 13 case and do well making payments for a year or two, but then chaos ensues. Perhaps you lose your job, get sick, or find that you can't keep up with your repayment plan.
Although you may have used a bankruptcy filing to get out of prior financial struggles, unfortunately, federal law limits how often you can file a new bankruptcy case. And even if you're allowed to file a case, one of the benefits of that filing—the automatic stay—may be restricted or delayed.
An automatic stay stops creditors from taking actions against debtors. It stops collections calls, foreclosures, and repossessions.
How Long Between Bankruptcy Filings?
There's a good chance that you can file for bankruptcy after having already gone through one. How soon depends on what kind of case you filed earlier and what you're planning on filing this time.
It also depends on whether the earlier case resulted in discharge. A bankruptcy discharge releases the debtor from personal liability of any debts included within a bankruptcy case. If the previous case was dismissed without a discharge, you could file again right away, subject to restrictions. A bankruptcy dismissal occurs when a judge or trustee closes your case before it is complete.
After Chapter 13 Dismissal
As a continuation of the above example, say a circumstance arises and you're not able to make the payments on your Chapter 13 repayment plan. Usually, when that happens, you won't be granted a discharge of your debts unless you're eligible for and request a hardship discharge. Instead, your case will be dismissed.
If your Chapter 13 case is dismissed, you can file another case right away. For strategic reasons, some debtors will file and dismiss several cases in quick succession. This isn't necessarily a good idea, but it is possible.
The debtor, facing a threat to their property, files the bankruptcy case to stop a repossession or foreclosure. When the danger passes, the debtor will either ask the court to dismiss the case or more likely, stop making plan payments, which will result in a dismissal.
When the creditor renews its collection efforts, the debtor files a new case. To combat debtors who game the system in this way, Congress included provisions in the Bankruptcy Code that allow debtors to file new cases. But, the Bankruptcy Code also limits how the debtor can use the automatic stay in such situations.
Multiple Bankruptcy Cases Within 12 Months
One of the many duties of a bankruptcy judge or trustee is to protect the bankruptcy courts against serial filers. Although there are no specific time frames set forth within bankruptcy law, this decision is made by the preceding judge or trustee on a case-by-case basis. Some of the more common occurrences include:
One Case Pending Within 12 Months
If you had one prior bankruptcy case pending within the previous 12 months dismissed, you could probably file a second case, but the automatic stay will last for only the first 30 days of the latter case. Creditors will have to stop their collection actions, but only for 30 days. After that, the automatic stay will naturally end unless you get court approval to extend.
Two Cases Pending Within 12 Months
If you had two cases pending within the previous 12 months, you might be allowed to file a third case, but the automatic stay will not go into effect at all unless you ask the court to impose it.
To determine if you deserve the automatic stay, the court will look at several factors including:
- The number of cases you filed
- Whether your cases were dismissed because of non-payment, error (yours or your attorney’s), failure to file the required paperwork, or failure to cooperate with the trustee
- Whether you dismissed your case after a creditor filed a motion for relief from the automatic stay (usually seeking permission to repossess a car or foreclose on a house)
- Whether your circumstances have changed since your previous case was dismissed
An Example of Serial Filing
Even if your prior cases were more spread out more than just the last 12 months, you might not be home free. Your bankruptcy trustee, the Office of the U.S. Trustee (a component of the Justice Department), and your creditors will scrutinize all your prior cases to determine if you are trying to take advantage of the system. For example:
Dave and Margaret filed a Chapter 13 case in 2018. This wasn't their first case. Their prior cases include:
- 2011, Chapter 7 case: received a discharge
- 2013, Chapter 13 case: case dismissed for failure to make plan payments
- 2016, Chapter 13 case: case dismissed for failure to file required paperwork
In each case, the automatic stay was not affected, but after the latest case was filed, the Chapter 13 trustee asked the court to dismiss the stay for serial filing. Dave and Margaret will likely have to go into court and testify regarding the reasons for filing and dismissing both of the previous Chapter 13 cases. If the court allows the new case to continue, it will probably be under the condition that if the new case is dismissed, the couple will not be permitted to file another case for a period of time, which can often be a year or more.
If their actions particularly perturb the court, the court could immediately dismiss the case with a provision that would prevent them from re-filing for a period of time. In certain egregious cases, courts have permanently enjoined a debtor from ever filing another bankruptcy case.