When debts become a burden and stressful, filing for bankruptcy is your only option. Filing for bankruptcy helps reduce, restructure, or eliminate your debts. It stops your creditors from pestering you to collect their debts.
But what if you already filed for bankruptcy before and found yourself in the same situation again? Can you file for bankruptcy twice?
Yes, you can file for bankruptcy twice or three times if you wish to. However, you must wait a certain period before filing your second bankruptcy. One factor that influences how long you’ll have to wait is whether your initial bankruptcy was already dismissed or discharged. It also depends on the type of bankruptcy you filed and the one you intend to file again.
This article explains everything you need to know about filing for bankruptcy twice and whether it’s a good idea.
How Long Should You Wait to File Bankruptcy Again?
While the law permits you to file for bankruptcy twice, there are still rules that you must follow. In most cases, you will have to wait between two to eight years before filing your second bankruptcy, depending on the type.
If you file before the waiting period expires, you won’t qualify for a second debt discharge. You should wait until you receive a discharge from the first bankruptcy, so you avoid wasting time and money following a process that won’t be successful.
Here’s how long you should wait before filing a second bankruptcy, depending on the type.
Filing for Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the common bankruptcy that many individuals and families file. People prefer this type of bankruptcy because it’s the quickest and the simplest.
This is also known as liquidation bankruptcy, where most of your assets are sold to pay off the debts. Chapter 7 bankruptcy clears you from most debts, including credit card debts, personal loans, and medical bills. It gives you a second chance to regain your financial freedom.
When you file for Chapter 7 Bankruptcy for the first time, you’ll have to wait at least eight years before filing another to receive your second discharge.
If you filed for Chapter 7 bankruptcy the first time and need to file Chapter 13 for the second time, you’ll have to wait for at least four years. This rule applies because you’ll have to follow a given payment plan in Chapter 13 bankruptcy to clear your debts.
Filing for Chapter 13 Bankruptcy
If you have a regular income but are still overwhelmed with debts, you can file for Chapter 13 bankruptcy. This bankruptcy reorganizes your debt to give you a better plan to clear them without debtors being constantly on your back.
This type of bankruptcy allows you to keep your assets if you successfully follow the set repayment plan.
If you’re successfully discharged from Chapter 13 Bankruptcy and need to file another, you’ll have to wait until two years elapse to receive a second discharge. These two years will be calculated from the date you filed for bankruptcy, not the discharge date.
If you need to file for Chapter 7 bankruptcy after Chapter 13, you’ll have to wait for at least six years after the date of filing the bankruptcy.
However, if you successfully stick to the payment plan set during your Chapter 13 bankruptcy, the six-year wait period can be waived. To receive the waiver, you must pay all your unsecured debts, including credit cards, personal loans, and medical bills.
Should You File for a Second Bankruptcy
While it’s possible to file for bankruptcy more than once, is it really a good idea to file for a second bankruptcy? While bankruptcy is a powerful debt relief tool, finding yourself in another debt situation can be frustrating.
Filing for bankruptcy is never a smooth ride because it has unique consequences. Before you file your second bankruptcy, ask yourself the following questions:
How Will It Affect Your Credit Score?
A bankruptcy on your report badly affects your credit score. If you file a Chapter 7 bankruptcy, it will stay on your credit report for up to 10 years. Chapter 13 will remain on your credit report for up to seven years.
Imagine when you’re just about to clean your name and regain your creditworthiness, then you file another bankruptcy. You’ll have to wait another ten years before cleaning your credit report.
So, if your credit score really matters to you, you should think twice before filing a second bankruptcy.
Is It a Good Financial Move?
It’s important to think about your financial health before filing a second bankruptcy. Sometimes, not filing can be more harmful to your finances than filing. Think about the missed payments and lawsuits that you stand to face if you don’t file for bankruptcy.
Sometimes, it’s a good idea to file for a second bankruptcy after you successfully get a discharge from your first one.
If you filed a Chapter 7 bankruptcy for the first time, you should consider filing Chapter 13 for the second time. This will allow you to work with your creditors on a good payment plan.
The second bankruptcy can help you save your house in case of a missed mortgage, clear your debts within a workable period, and catch up on child support.
So, if the benefits of filing a second bankruptcy outweigh the drawbacks, then it’s a good idea to file it.
Can You Negotiate with Your Creditors?
Another thing you should consider before filing a second bankruptcy is whether there’s room for negotiation with your creditors.
You can work together to come up with a good payment plan without involving the court and going the bankruptcy route.
If you suspect that your current financial situation is leading you toward filing a second bankruptcy, you should consider contacting your creditors. Depending on your relationship, your creditors will be more than willing to offer you flexibility.
After all, they stand to gain more if they offer you a payment plan rather than allow you to file for bankruptcy.
Don’t ignore your creditors or your credit situation because they won’t go away on their own. Work with your creditors to come up with a resolution that can work for both of you. If the talks don’t bear fruit, you’ll always have the option of filing your second bankruptcy.
Abusive Bankruptcy Filing
While the law allows you to file for bankruptcy if you feel your debts are beyond your financial capabilities, you should never abuse bankruptcy filing.
Your bankruptcy filing will be considered abusive if your Chapter 7 bankruptcy doesn’t pass the “means test.” This is the standard that determines your right to get a debt discharge.
Abusive bankruptcy can also apply when an individual uses bankruptcy to evade debts. If you inappropriately use bankruptcy to avoid creditors, fall behind on debt, extend your payment period, or avoid lawsuits, you’ll abuse the filing.
If you file for a second bankruptcy, the court will thoroughly scrutinize you to determine whether you’re abusing the filing. You may lose the benefits of filing bankruptcy if you abuse it.
Bottom Line
Filing for bankruptcy is a wonderful way to get debt relief and start your life afresh. However, you might find yourself in the same situation again and wonder if it’s appropriate to go down the route.
While it’s not a bad idea to file for a second bankruptcy, you must think twice about the consequences before you proceed.
Consider working with professionals such as bankruptcy attorneys to help evaluate your situation. They may take you through the consequences of multiple filings, what the law requires, and your financial situation.
With the help of professionals, you will be able to make a more informed decision.
