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How Often Can A Chapter 7 Bankruptcy Be Filed?
Bankruptcy is a lawful way to clear your debts and start over with a clean slate. It is a legal process that helps bankrupt individuals pursue debt settlement and reorganize their finances. Bankruptcy laws may vary from state to state. In Maryland, there are bankruptcy rules that you need to follow when you decide to declare bankruptcy. A credible Towson bankruptcy attorney can help you abide by the state laws to ensure the success of your bankruptcy case.
Before you declare bankruptcy, you must know how to choose the most appropriate bankruptcy type that will solve your financial problems. Among the different types of bankruptcy, Chapter 7 bankruptcy (liquidation bankruptcy) is the most common type.
Bankruptcy is supposed to help you have a fresh start, but things don’t always turn out the way we plan them. If you’re facing new financial challenges and overwhelming debt after your final discharge, you may wonder if you can still file bankruptcy. The article will help you understand the following:
- How Does Chapter 7 Bankruptcy Work?
- When Do I File Chapter 7 Bankruptcy?
- How Do I Qualify For Chapter 7 Bankruptcy?
- How Often Can You File for Bankruptcy?
- What Are the Reasons to Switch Your Bankruptcy Filing?
How Does Chapter 7 Bankruptcy Work?
When you file for Chapter 7 bankruptcy, the bankruptcy court places an automatic stay on your current debts. This prevents the creditors from collecting payments, garnishing your wages, foreclosing on your home, repossessing property, evicting you, or turning off your utilities. The court will take legal possession of your property and appoint a bankruptcy trustee to your case. The trustee’s job is to review your finances and assets and oversee your Chapter 7 bankruptcy. They will sell a certain property that bankruptcy won’t let you keep (nonexempt property) and use the proceeds to repay your creditors.
When Do I File Chapter 7 Bankruptcy?
There are several factors that you need to consider in filing Chapter 7 bankruptcy. The following criteria can indicate that Chapter 7 may be the right solution for you:
- Your monthly income is below the median level in your state.
- You have little to no disposable income.
- Your debts amount to more than half your annual income.
- It will take five years (or more) to pay your debts.
How Do I Qualify For Chapter 7 Bankruptcy?
Chapter 7 bankruptcy doesn’t necessarily work for everyone. There are a few requirements you’ll need to meet to file for a Chapter 7 bankruptcy:
- Take credit counseling sessions from an approved credit counseling agency within 180 days before filing.
- Pass the means test. (The average of your monthly income during the previous six months must be less than the median income for the same-sized household in your state. This test will determine if your disposable income is high enough to make partial payments to unsecured creditors. If you don’t pass the means test, you may still be able to file a Chapter 13 bankruptcy).
- You can’t have filed a Chapter 13 bankruptcy during the past six years.
- You can’t have filed a Chapter 7 bankruptcy during the past eight years. (If you tried to file a Chapter 7 or 13 bankruptcy and your case was dismissed, you have to wait at least 181 days before trying again)
How Often Can You File for Bankruptcy?
There is no specific limit to how many times you can file for bankruptcy; however, there must be a certain time limit between the filing dates. If you’ve filed for bankruptcy before, you must wait for some more years before wiping out debt in a new bankruptcy case. In addition, you are expected to make your best effort to pay off bankruptcy in between filings.
The United States Bankruptcy Code sets the time limit according to the type of bankruptcy. If you received a discharge in your first bankruptcy, then a set amount of time must pass before you can have your debts discharged by the courts again. The exact amount of time between the two discharges depends on which type of bankruptcy you use for the first and second filing. A competent Towson bankruptcy attorney can help you understand the time limits in between the bankruptcy charges. The clock starts from the filing date of the previous bankruptcy case that was discharged. Here are the limits:
Chapter 7 Bankruptcy to Chapter 7 Bankruptcy
Before filing for a new Chapter 7 bankruptcy case, there must be a gap of 8 years from the discharge date of the previously filed Chapter 7.
Chapter 13 Bankruptcy to Chapter 13 Bankruptcy
For Chapter 13 bankruptcy, there must be a gap of 2 years in between the previously discharged Chapter 13. You’ll likely qualify for a second bankruptcy discharge after finishing the first case since Chapter 13 bankruptcy lasts for 3-5 years.
Chapter 7 Bankruptcy to Chapter 13 Bankruptcy
If you want to file Chapter 13 after getting a Chapter 7 discharge, there must be a gap of 4 years in between the filing. If you pay off unsecured debts during Chapter 7, you can file a Chapter 13 to create a repayment plan to pay off a tax debt or other debts that were not discharged during the Chapter 7 filing. Chapter 13 can pay off priority debts (including domestic support arrearages or newly-incurred taxes). It can also help you catch up on missed mortgage or car loan payments and keep your house or vehicle.
Chapter 13 Bankruptcy to Chapter 7 Bankruptcy
Filing Chapter 13 bankruptcy immediately after receiving a Chapter 7 discharge is called a “Chapter 20 bankruptcy”. There must be a gap of 6 years between these two bankruptcy filings. However, this rule can be waived, if during the previous Chapter 13, you’ve paid all or at least 70% of your unsecured debts in a plan proposed in good faith and implemented through your best efforts.
What Are the Reasons to Switch Your Bankruptcy Filing?
Any significant change on your repayment plan, the number of unsecured debts that you owe, and the length of time the bankruptcy will stay on your records depending on the type of bankruptcy that you file. A reliable Towson bankruptcy attorney can help you decide if switching your bankruptcy chapter is a good idea. An attorney can’t change the time limits between filing dates, but they can help you prepare to file as soon as the date is available to you.
The Role of a Bankruptcy Attorney
Bankruptcy is a long and complex process. Filing for bankruptcy requires knowledge and understanding of the bankruptcy laws in your state. Bankruptcy filing is a progressive process that will help you solve your financial problems one step at a time. Debt repayment and reorganization of your finances shall be your priority. If you need to file a second bankruptcy chapter, you have to ensure that you met the minimum number of years in between the two filings. For legal help, do not hesitate to schedule a consultation with our experienced Towson bankruptcy attorneys at The Grafton Firm. Our bankruptcy law firm can help you rebuild credit, pursue a second discharge, or work towards your improved financial situation.