You can file Chapter 7 before 8 years, but you cannot receive a discharge of debts before eight years. That is a crucial distinction that many people do not understand.
However, there are limited exceptions to this general rule. Furthermore, other options exist to resolve debt problems if you cannot file bankruptcy again this soon.
Let’s look at repeated bankruptcy filings more closely to understand better what you can do if you need to file another Chapter 7 bankruptcy case.
What Is a Bankruptcy Discharge and How Do I Get One?
A bankruptcy discharge is an order from the court eliminating your legal responsibility for paying a debt. For example, you owe ABC Credit Card Company $15,000 in credit card debt. You file Chapter 7, list ABC Credit Card Company in your bankruptcy forms, and complete your Chapter 7 case.
ABC Credit Card Company does not object to your discharge. Therefore, when the court issues the discharge order, ABC’s debt is discharged or “erased.” In other words, ABC Credit Card Company cannot take any actions to collect the discharged debt. Actions could include, but are not limited to:
- Turning the debt over to a debt collector
- Sending you letters or calling you about the debt
- Filing a debt collection lawsuit
- Seizing assets or garnishing your wages
- Reporting the debt on your credit report as delinquent debt
The bankruptcy discharge wipes away the debt. You do not owe ABC Credit Card Company any more money.
Most unsecured debts are dischargeable through Chapter 7 bankruptcy. Those debts include, but are not limited to:
- Credit card debts
- Medical bills
- Personal loans
- Personal judgments (except DUI judgments)
- Most payday loans
- Some old income tax debts
- Old rent and lease payments
- Deficiency judgments for repossessions and foreclosures
The purpose of filing Chapter 7 is to obtain a bankruptcy discharge. You want to get rid of your debts to recover from a financial crisis and move forward with your life.
You obtain a bankruptcy discharge by filing a bankruptcy petition and completing the bankruptcy case. If you do not complete your bankruptcy case, the court dismisses your bankruptcy case without granting a discharge. For example, you do not complete your Debtor Education Course (second bankruptcy course), or you do not show up for your bankruptcy hearing.
Also, a creditor or a trustee may object to the bankruptcy discharge. If so, the court could deny the discharge for a specific debt or deny a bankruptcy charge for the entire case.
Waiting Period to File Chapter 7 Bankruptcy Again
There is no waiting period to file another Chapter 7 case. You can file another Chapter 7 bankruptcy case whenever you wish. However, you may or may not be eligible to receive a bankruptcy discharge.
The purpose of the waiting period between bankruptcy cases is to become eligible for a bankruptcy discharge. You must wait eight years between Chapter 7 filings to obtain another bankruptcy discharge. If you file a Chapter 7 before the end of the 8-year waiting period, you will not receive a bankruptcy discharge.
What happens if I do not receive a bankruptcy discharge? You owe your creditors the full amount of the debts as if you never filed the bankruptcy case.
Why Would Someone Need to File Chapter 7 Before 8 Years?
It can be difficult to imagine why someone would need to file multiple bankruptcy cases. Let’s look at a simple situation that could happen to anyone.
Suppose you incurred significant credit card and other debts during your college years or in your early 20s after moving out of your parents’ home and getting a job. You struggled to pay the bills on very little income, so you used the credit cards to make ends meet. For some people, running up credit card debt could result from immaturity or inexperience in managing finances.
Whatever the reason might be, you could not pay your debts. Therefore, you filed Chapter 7 to get rid of the debts. You received your bankruptcy discharge and moved on with your life.
However, six years later, you were in a tragic car accident. You were out of work for months recovering from your injuries. You used credit cards and borrowed loans to pay your bills during that time. After you went back to work, you could not keep up with the debt payments. You need to file bankruptcy, but it is still two years before you are eligible to file for Chapter 7.
Hundreds of scenarios like the ones above could result in multiple bankruptcy filings. Life is unpredictable. We never know what may happen next week or next year.
Many people file multiple bankruptcy cases over their lifetime. That does not mean they are “bad” with money or “abuse” credit cards. It could merely mean they had experienced multiple situations that were not within their control that resulted in a financial crisis.
For this reason, the Bankruptcy Code permits people to file bankruptcy again. It recognizes that people can go through horrible events that make it impossible to pay their debts more than once in a lifetime.
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You Might Be Eligible to File a Chapter 7 Bankruptcy
What Happens if I Need to File Chapter 7 Before 8 Years?
There could be situations where you need to file Chapter 7 before 8 years. If so, there could be a few options.
You Did Not Receive a Bankruptcy Discharge
The waiting period for being eligible for another Chapter 7 bankruptcy discharge is eight years. However, if your previous Chapter 7 case was dismissed without a discharge, you could be eligible to file Chapter 7 before 8 years if none of the following happened within the past 180 days:
- You failed to appear for a required court hearing, and the court dismissed your Chapter 7 case
- The court dismissed your Chapter 7 case because you disobeyed a court order
- You voluntarily dismissed your Chapter 7 case
If you receive a Chapter 7 bankruptcy discharge, you could be eligible to file Chapter 13 if you cannot file Chapter 7 bankruptcy before 8 years.
File a Chapter 13 Bankruptcy Case
The waiting period for a bankruptcy discharge between a Chapter 7 case and a Chapter 13 case is four years. Therefore, if it has been at least four years since you filed Chapter 7, you might be eligible to file under Chapter 13.
Chapter 13 is a reorganization bankruptcy. You pay monthly payments to a Chapter 13 trustee for three to file years. A few advantages of Chapter 13 over Chapter 7 include:
- You can save your home from foreclosure in Chapter 13
- You might be able to lower your car payments to keep your vehicle
- In a Chapter 13, you can repay debts that are non-dischargeable, such as taxes and domestic support arrearage, over five years
- Chapter 13 cases can protect assets that a Chapter 7 trustee might sell
Filing Chapter 13 is generally more complicated than filing Chapter 7. You may want to speak with a bankruptcy lawyer before filing Chapter 13.
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You Might Be Eligible to File a Chapter 13 Bankruptcy
File a “Chapter 20” Bankruptcy Case
Some individuals file “Chapter 20”. “Chapter 20” is not an actual chapter of the Bankruptcy Code. Instead, it refers to filing a Chapter 13 immediately after discharging debts in a Chapter 7 case.
First, you file Chapter 7 to discharge your unsecured debts. Getting rid of these debts in full through the Chapter 7 case lowers the amount you must pay in a Chapter 13 bankruptcy case. Then, you file a Chapter 13 case.
You will not receive a discharge in the Chapter 13 case because you did not wait the four-year period after filing Chapter 7. However, the Chapter 13 case could allow you time to pay off debts that could not be discharged in the Chapter 7 case, such as tax debts and past due domestic support payments (i.e., child support and alimony).
You may also be able to catch up on mortgage payments in the Chapter 13 case to save your home. For example, a Chapter 13 bankruptcy case might allow you to “strip” a second mortgage from your home so that you would only pay pennies on the dollar to get rid of the second mortgage. You might also be able to lower your car payments in Chapter 13 to avoid losing your vehicle.
NOTE: Filing “Chapter 20” should not be attempted without consulting a bankruptcy lawyer. Some drawbacks could make your financial situation worse. Therefore, get legal advice from a bankruptcy attorney before attempting this option.
Non-Bankruptcy Alternatives to Get Rid of Debts if You Need to File Chapter 7 Before 8 Years
You could have one or more non-bankruptcy alternatives to get out of debt. At Ascend, we help you explore debt relief options free of charge.
For example, debt settlement might be an option for getting out of debt without filing bankruptcy. Debt management is another option that can help some people avoid bankruptcy while getting rid of debts that they cannot afford to pay. Likewise, our Savvy debt payoff planner can help you pay off debts without bankruptcy.
Call or text us at (833) 272-3631 or contact us online for a free case evaluation. Our caring, knowledgeable team members help you explore debt-relief options. We want to help you move on with your life after a financial hardship.