Bankruptcy allows individuals or businesses with severe financial difficulties to discharge their unsecured debts or make a repayment plan to pay their creditors. Although bankruptcy is meant to relieve your financial problems and protect you from creditors' collection actions, you may face renewed financial issues immediately after bankruptcy.
Under California law, there is no limit to the number of times you can file for bankruptcy. However, there are set rules on when you can file for bankruptcy or another bankruptcy. Additionally, whether or not your bankruptcy ended in a discharge or dismissal could impact your chances of qualifying for another bankruptcy.
With the complex bankruptcy laws in California, you will need the insight of a competent bankruptcy attorney. Your lawyer will guide you through the alternatives of multiple bankruptcy filings and the refiling process.
An Overview of Multiple Bankruptcy Filing
You can file for bankruptcy multiple times under California law. However, the frequency of your bankruptcy petitions will be determined by the outcome of your previous bankruptcy petition. Most bankruptcy filers hope for a successful petition where their debts are discharged.
However, there is no guarantee of discharge. The judge can dismiss your bankruptcy petition for various reasons, including insurance fraud, failure to attend the scheduled meetings, and failure to present relevant documents. The period you must wait before filing another bankruptcy will vary depending on how your case ended.
You can file another petition immediately if your bankruptcy ends in a dismissal. However, you must determine and rectify the errors that could have resulted in the dismissal of your case. However, if your bankruptcy was discharged, you must adhere to the following timelines.
Filing Chapter 7 Bankruptcy After Chapter 7
Chapter 7 bankruptcy involves liquidating assets to pay creditors and discharging the remaining debts. After a successful Chapter 7 bankruptcy, you must wait up to eight years to qualify for another liquidation bankruptcy. In this case, the eight years begin from the date you filed your petition and not when you received the discharge.
Filing Chapter 7 After Chapter 13
Sometimes, reorganizing your finances through Chapter 13 bankruptcy does not improve your situation. If you cannot adhere to the repayment plan terms, you can file for liquidation bankruptcy. This allows your unsecured debts to be discharged. You can file a Chapter 7 bankruptcy six years after receiving your discharge under Chapter 13.
Your waiting period could be waived if you have paid your unsecured creditors through a Chapter 13 bankruptcy repayment plan.
Filing Chapter 13 After Chapter 7
If you have previously filed for Chapter 7 bankruptcy, you can file under Chapter 13 after four years. This timeframe is applicable if you are hoping to receive a discharge. If unsecured debts have become unmanageable even after liquidation bankruptcy, Chapter 13 bankruptcy can help you catch up with the payments.
Filing Chapter 13 After Chapter 13
By filing for Chapter 13 bankruptcy, you will not get rid of your debts. However, you can enjoy the automatic stay while you make a repayment plan to pay your creditors. If your debts are still overwhelming with a repayment plan, you can file another Chapter 7 bankruptcy. This allows you to modify your repayment plan by changing the terms.
Reasons to Switch Up Your Bankruptcy Filing from Another Chapter
The type of bankruptcy you file could change the nature of your repayment plan and the amount of unsecured debt you owe. Additionally, it can impact the duration that a bankruptcy can remain on your record. Therefore, filing a different type of bankruptcy during your second or third filing would be reasonable.
When you work with a competent bankruptcy attorney, they can help you understand your options and decide whether switching bankruptcies is best for you. In your subsequent bankruptcy filing, you can explore these strategies:
- Switching to Chapter 13 after a Chapter 7 discharge. If you have paid off your unsecured debt through Chapter 7 bankruptcy, you can create a repayment plan through Chapter 13 bankruptcy. This allows you to catch up with the payments for your remaining unsecured debts.
- Switching from Chapter 13 to Chapter 7. If you pay all your unsecured creditors through a Chapter 13 repayment plan, your waiting period for filing liquidation bankruptcy will be waived. This means you will not need to wait six years to file Chapter 7 Bankruptcy. This helps discharge the debts you could not pay with the Chapter 13 repayment plan.
- Repeating Chapter 13 bankruptcy. Filing Chapter 13 bankruptcy is not always aimed at eliminating your debts. If the repayment plan you made in your first bankruptcy is not working for your financial situation, you can follow it up with another Chapter 13 bankruptcy. In your second bankruptcy, the repayment plan will be modified to suit your situation while ensuring your creditors are paid back.
Loss of the Automatic Stay for Multiple Bankruptcy Filers
When you have overwhelming debt and cannot pay it, creditors may begin collection tactics, including numerous phone calls and threats of legal action. A significant benefit of filing for bankruptcy in California is the automatic stay.
An automatic stay is granted when you file a bankruptcy petition with the court. It stops creditors from taking action until you receive a discharge. Creditors can also benefit from the automatic stay in that your property remains in the bankruptcy estate controlled by the trustee. You cannot sell the property; the trustee will review it before distributing funds to different creditors.
However, when you file for bankruptcy multiple times, you could be suspected of attempting to manipulate the system. For this reason, multiple bankruptcy filers must prove to the court that they are filing in good faith before receiving automatic stay protection.
Whether you will benefit from the automatic stay and the length of protection you will receive will vary depending on the number of times you have filed for bankruptcy in California in a single year:
- Typical stay. You are entitled to automatic stay protection without limitations if you have not filed for bankruptcy within the year.
- 30-day automatic stay. Individuals who have filed at least one bankruptcy petition within the year will be entitled to a 30-day stay.
- No stay. Bankruptcy filers with at least two or more bankruptcy cases within a year will not benefit from the automatic stay.
If you receive less protection than the typical stay, you can request the court extend your protection. However, you must present sufficient evidence to prove that you filed the bankruptcy in good faith. You can do this by preparing for your motion and attending a hearing within thirty days of filing.
Your bankruptcy filing is considered bad if the court ascertains your intentions to take advantage of the bankruptcy proceedings to avoid paying your debt. For example, an automatic stay delays foreclosure. Therefore, some people file for bankruptcy to delay these proceedings. If you can prove that you are under serious financial difficulties and are not filing for bankruptcy for the sole purpose of delaying the foreclosure, you can receive extended protection while filing multiple bankruptcies.
Filing Bankruptcy Again Without Discharge
Most individuals in financial distress can recover through bankruptcy. Even when you meet the requirements for each type of bankruptcy, there is no guarantee that the court will receive a discharge. If your case is dismissed, you will return to the same debt position you were in when you filed.
With the guidance of a skilled bankruptcy attorney, you can determine the reason for the dismissal of your petition. Before filing another bankruptcy petition, you must clarify the reasons for the dismissal. Some of the reasons why the court can dismiss your bankruptcy petition include:
You Committed Bankruptcy Fraud
When filing for bankruptcy, you must complete numerous forms of paperwork. California bankruptcy laws require you to be truthful when providing your personal and financial information on the petition. Omitting critical information or lying to gain an advantage in the bankruptcy process is considered fraud and can result in the dismissal of your case. Additionally, bankruptcy fraud can result in an arrest and criminal charges.
Failure to Complete Mandatory Courses
California bankruptcy laws require all bankruptcy files to undergo credit before filing and debt management after receiving the discharge. Upon satisfying the requirements of each course, you will receive a certificate of completion. The court can dismiss your petition if you fail to meet this requirement. If you are still seeking bankruptcy relief, you can complete the courses and file another petition.
Failure to Pay the Bankruptcy Fees
If you want to file for bankruptcy, you must pay the filing fees to the court where you file your petition. When you file for liquidation bankruptcy, the court allows you to pay the filing fee in installments. Failure to pay the required fees within the stipulated time can result in the dismissal of your petition.
Failure to Provide Supporting Documents
When you file for bankruptcy in California, you must disclose all your financial affairs to the trustee. You can do this by filling out all the necessary forms and presenting documents supporting the information you indicate on these forms. The court can dismiss your case for failure to complete the bankruptcy petition, schedules, and other forms.
Not Attending Creditors Meetings
A creditors meeting is scheduled by your trustee and attended by all your creditors. At this meeting, your bankruptcy trustee will ask questions about your petition and financial matters. If you fail to attend this meeting without making prior arrangements, you may not receive a discharge.
Setbacks of Multiple Bankruptcy Filing in California
Under California bankruptcy law, you can follow up a bankruptcy with another bankruptcy petition. This could be necessary when your first bankruptcy case was dismissed, or the discharge did not improve your financial situation. The only limitation the court puts on multiple bankruptcy filings is the waiting period for refiling bankruptcy petitions.
Filing for bankruptcy for a second or third time can help you discharge more debt or modify your repayment plan. But declaring bankruptcy isn't always the wisest course of action. The following are a few drawbacks of filing for bankruptcy more than once:
Credit Report Damage
Bankruptcy may appear on your credit report for up to six years following discharge. This may result in higher interest rates from creditors or make it harder for you to obtain loans. Such a situation can place you in further financial difficulties.
Loss of Non-Essential Assets
If you file for Chapter 7 Bankruptcy, the bankruptcy trustee will liquidate your assets and use the proceeds to pay your creditors. If you retain your secured assets, you must continue to pay for them. If you follow up a Chapter 7 with a Chapter 7 bankruptcy, more of your assets will be sold. This could also result in the loss of your tax proceeds.
Not Every Debt Is Discharged
No matter how often you declare bankruptcy in California, certain debts such as credit card debt, alimony, and child support will not be eliminated. Therefore, declaring bankruptcy might not be helpful if these debts are the cause of your financial problems.
Employment Considerations
You can lose your job if you declare bankruptcy more than once while managing trust assets and funds at work. A person with a bankruptcy record is also not qualified to be a director of a corporation.
Extra Financial Challenges
Filing for bankruptcy is not a free process. Your case could cost you up to $6,000, depending on the type of bankruptcy you choose. Additionally, you must spend on attorney fees because multiple filings are complex. For this reason, filing for a second or third bankruptcy can put you in further financial distress.
Purchasing a Home Becomes Challenging
After your bankruptcy discharge, you must complete the waiting period before qualifying for a mortgage. The waiting period to purchase a home after Chapter 7 bankruptcy is two to four years, while that of a Chapter 13 bankruptcy is one to three years.
Personal Distress
Bankruptcy is a public record, meaning your friends, family, or business partners can learn about your financial situation. Filing multiple bankruptcies can be shameful and cause emotional distress.
Alternatives to Multiple Bankruptcy Filing
Filing for bankruptcy after receiving a discharge is not ideal. This is because bankruptcy is stressful and costly and can ruin your credit score. Fortunately, there are some options you can explore before resulting in another bankruptcy, and they include:
Loan Modification
Being in arrears on car payments, mortgages, and other loans could result in losing your assets, wage garnishments, and lawsuits filed by creditors against you. If you have previously filed for bankruptcy, you can avoid going a similar route by seeking a loan modification.
Loan modification involves negotiating with your creditors to modify the terms of your loan. Some of these modifications could include lowering interest rates or increasing the duration of loan payments.
Debt Consolidation
Staying current on loan payments can be challenging in financial distress. Debt consolidation combines multiple debts into one, making it easier to keep track of repayment. If you qualify for a low-interest loan, debt consolidation could be an excellent alternative to filing multiple bankruptcies.
Short Sale
Your financial situation will not always improve after bankruptcy. Losing your house and other valuables could be too much to bear during these times. Many will begin considering filing for bankruptcy again to keep their assets. However, accepting a short sale will save you from further declaring bankruptcy.
Your lender will forgive the remaining amount in a short sale, allowing you to sell the property at a reduced price. Although a short sale can affect your credit score, it is still considerably preferable to bankruptcy.
Credit Counseling
When your debts are overwhelming, you can explore credit counseling instead of filing for bankruptcy. In this case, a credit counseling agency could help you make a plan to repay your creditors. Additionally, the credit counselor can negotiate with your creditors to allow a favorable plan through which you can pay your debts without filing for bankruptcy.
Find a Reliable Bankruptcy Attorney Near Me
Many people and businesses file for bankruptcy for the fresh financial start offered by this legal proceeding. Bankruptcy does not always serve the intended purpose, and some people struggle to get back on their feet even after receiving the bankruptcy discharge. If you are in such a predicament, you may be eligible to file another bankruptcy.
You can receive another Chapter 7 bankruptcy every eight years, but the time could be shorter if you opt for another bankruptcy. For Chapter 13 bankruptcy filers, you only have to wait two years to seek another relief. Filing for multiple bankruptcies could present several difficulties, including losing your automatic stay and failing to receive a full discharge.
If you are considering bankruptcy after receiving a discharge, you need legal insight. At Los Angeles Bankruptcy Attorney, we will offer the legal guidance and representation you need to navigate your bankruptcy petition in Los Angeles, CA. Contact us at 424-285-5525 to discuss your case.
