Southern California Bankruptcy Law Blog

Can I File For Bankruptcy More Than Once? (Part 1)

Posted in Chapter 11, Chapter 11 for Individuals & Married Couples, Chapter 13, Chapter 7, Small Business Bankruptcy, Small Business Chapter 7

The short answer to this is, yes.  But as you may suspect from the fact that this post is considerably longer than one sentence, there is a good deal more to a thorough answer than that monosyllabic response.  There are two possibilities regarding your previous bankruptcy:  (1) you received a discharge, and (2) your case was dismissed. Today’s post deals with the first situation.  The next post will deal with the second situation.

I.          Your Received A Discharge In Your Previous Case

The big picture goal in personal bankruptcy is to receive a discharge of your debts.  This affords you the fresh financial start that is the raison d’être of a personal bankruptcy.  From a debtor’s perspective this is marvelously liberating.  However, from the creditors’ perspective it can be a hard hit.  As a result, Congress has put some time limitations in the Bankruptcy Code, meaning that you must wait a while between bankruptcy filings if you want to receive a discharge in the future bankruptcy case.  How much time?  That depends on which chapter you plan on using in your future bankruptcy case, and under which chapter you received your previous discharge.

            A.        The Future Bankruptcy Is Under Chapter 7

                        1.        The Previous Bankruptcy Was Under Either Chapter 7 Or 11

Many people are under the mistaken impression that you must wait seven years after your prior discharge in order to be eligible to receive a Chapter 7 discharge.  The Bankruptcy Code provides otherwise (with emphasis added):

The court shall grant the debtor a discharge, unless — . . . the debtor has been granted a discharge under this section [i.e., in a Chapter 7 case], under section 1141 [i.e., in a Chapter 11 case] of this title . . . in a case commenced within 8 years before the date of the filing of the petition . . .

11 U.S.C. § 727(a)(8).

Thus, you must wait eight years between Chapter 7 bankruptcies, or between a Chapter 11 and a subsequent Chapter 7.  And the measurement is from filing date to filing date, not from discharge date to filing date, or discharge date to discharge date.  Moreover, there is no wiggle room:  If you file even one day before the first day of the ninth year you won’t be eligible for a Chapter 7 discharge.

If you can’t remember when you filed the previous bankruptcy your bankruptcy attorney will look it up for you.  That way you won’t waste time and money filing a bankruptcy that is doomed to fail.

                        2.        The Previous Bankruptcy Was Under Either Chapter 12 Or 13

Things are a bit more complicated if the previous bankruptcy was under either Chapter 12 or 13.  Here’s the relevant statutory language (with emphasis added):

The court shall grant the debtor a discharge, unless — . . . the debtor has been granted a discharge under section 1228 [i.e., in a Chapter 12 case] or 1328 [i.e., in a Chapter 13 case] of this title . . . in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least—

(A)     100 percent of the allowed unsecured claims in such case; or

(B)       (i)  70 percent of such claims; and

   (ii) the plan was proposed by the debtor in good faith, and was the debtor’s best effort . . .

11 U.S.C. § 727(a)(8).

Thus, based on this Code subsection, in most cases you must wait six years after a Chapter 12 (for family farmers or family fishermen — we never get any of these where I practice in Los Angeles County and Orange County) or Chapter 13 before filing a Chapter 7; and as before, the measurement is from filing date to filing date.

However, if your Chapter 12 or 13 multi-year debt repayment plan paid your general unsecured creditors 100% of what you owed them, or the plan paid them at least 70% of what you owed them — with some qualifying language — then you don’t have to wait any time at all before filing the Chapter 7 case.

As for the first part of the qualifying language, one of the requirements for having a Chapter 12 or Chapter 13 plan confirmed is that “the plan has been proposed in good faith and not by any means forbidden by law.” 11 U.S.C. § 1225(a)(3) or 11 U.S.C. § 1325(a)(3).  Therefore, it would be an oddity indeed, for someone to have repaid at least 70% of the general unsecured debt, and have received a discharge, if the plan had not been proposed in good faith.  Therefore, it would be unusual for this provision to prevent a debtor from successfully seeking a Chapter 7 discharge.

The term “debtor’s best effort” in the second part of the qualifying language is a term of art referring to the requirement that the plan payments be all of the debtor’s disposable monthly income.  (The term is also occasionally used to refer to the requirement that the plan must compensate the general unsecured creditors at least as much as they would receive in a Chapter 7 liquidation of nonexempt assets.)

In a subsequent post after this two-part series, I will discuss disposable monthly income in great detail.  For now, we will adopt the imprecise meaning that disposable monthly income is monthly income minus taxes, social security, and reasonable living expenses.

                        3.        The Debtor Is A Business

If you have a business that you want to put into a business Chapter 7, there are no time limitations, in part, because the business is ineligible to receive a Chapter 7 discharge:

The court shall grant the debtor a discharge, unless — the debtor is not an individual . . .

11 U.S.C. § 727(a)(1).

Instead, in a Chapter 7 the business is liquidated by the Chapter 7 Trustee assigned to the case, the proceeds are distributed to the creditors on a pro rata basis according to certain priority rules (see 11 U.S.C. § 507(a) and 11 U.S.C. § 726(a) for the excruciating details on the priority rules and the distribution process), and the business ceases to exist.

            B.        The Future Bankruptcy Is Under Chapter 11

The short answer here is that you do not have to wait after receiving your discharge in a previous case before filing a Chapter 11 case.  This may raise a question in the bankruptcy maven’s mind:  What about section 109(d)?  And the rest of you naturally ask, what is section 109(d)?

Chapter 1 of the Bankruptcy Code states:

Only . . . a person that may be a debtor under chapter 7 of this title . . . may be a debtor under chapter 11 of this title.

11 U.S.C. § 109(d).

Since our previous discussion established that you have to wait eight years between successive Chapter 7s to be eligible for a Chapter 7 discharge, doesn’t this mean that you have to wait eight years before filing a Chapter 11 if you received a Chapter 7 discharge in a previous case?

The answer is a bit nuanced and requires that we distinguish between eligibility to file a case and eligibility to receive a discharge.  Although a previous bankruptcy may render you ineligible to receive a Chapter 7 discharge, this does not necessarily mean that you are ineligible to file a Chapter 7 bankruptcy.  Of course, it is pointless to file a personal Chapter 7 case if you are ineligible to receive a discharge, since the whole point of filing for Chapter 7 protection is to get a discharge.

You might counter that the whole point of filing any bankruptcy case is to get a discharge.  And you would be incorrect.  It is true that most bankruptcies are filed with the intention of obtaining a discharge, but some are filed for other legitimate purposes.  (Unfortunately, some are filed for illegitimate purposes.)

For example, if you have a significant mortgage arrearage on your primary residence, and your circumstances have changed so that, with enough time, you could catch up on the arrearage, you can do so in a Chapter 13 plan — even if you are ineligible to receive a Chapter 13 discharge due to a previous bankruptcy discharge (more on that below).  Thus, while you won’t receive a Chapter 13 discharge upon plan completion, you can stop a pending foreclosure with the automatic stay and get a few years to catch up on the arrearage, thus saving the house.

The point is that § 109(d) does not preclude your filing for Chapter 11 protection, even if you are ineligible for a Chapter 7 discharge, as long as you are eligible to file a Chapter 7 case.

You might wonder, if you can file a Chapter 7 in spite of being ineligible for a discharge, what could possibly render you ineligible to file a Chapter 7.  Section 109(g) lists two situations in which you would be ineligible to file under any chapter:

Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if—

(1)  the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or

(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title.

11 U.S.C. § 109(g).

Therefore, if you file for bankruptcy protection, it is essential that you comply with the Court’s orders, and appear at the hearings.  Otherwise, the Court may dismiss your case with a 180-day bar to refiling.  In truly egregious cases some courts have dismissed cases with much longer bars.

In addition, it is a poor choice to voluntarily dismiss your case if any of your creditors files a motion for relief from the automatic stay.  In particular, do not agree with a creditor to dismiss your case as part of a loan modification application process because if any creditor — not just the mortgage company — has already filed a motion for relief from the automatic stay, you will face the 180-day bar to refiling.  This is especially important since most of the loan modification process has been a giant scam on the American public.

            C.        The Future Bankruptcy Is Under Chapter 12

If you are eligible to file a Chapter 12 because you are a family farmer (see 11 U.S.C. § 101(18) for the definition) or a family fisherman (see 11 U.S.C. § 101(19A) for the definition), then you do not have to wait after a previous bankruptcy before filing a Chapter 12 — unless, of course, the aforementioned § 109(g) discussion applies.

            D.        The Future Bankruptcy Is Under Chapter 13

I have already discussed the idea of filing a Chapter 13 in spite of being ineligible to receive a Chapter 13 discharge.  However, if you want to obtain a Chapter 13 discharge, you will have to wait between filings.  The relevant Chapter 13 subsection is:

. . . the court shall not grant a discharge of all debts provided for in the plan or disallowed under section 502, if the debtor has received a discharge—

(1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for relief under this chapter, or

(2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order.

11 U.S.C. § 1328(f).

This means that the old “Chapter 20” (a Chapter 7 followed by a Chapter 13) is no longer available to someone wishing to get two separate discharges.  Thus, if your debts exceed the unsecured debt ceiling for Chapter 13 found in section 109(e) (there are two Chapter 13 debt ceilings:  with some qualifying language they are $360,475 for unsecured debts, and $1,081,400 for secured debts), and you do a Chapter 7 to discharge your unsecured debts to become eligible to file a Chapter 13, you become ineligible for a Chapter 13 discharge.  However, as previously discussed, you can still use the subsequent Chapter 13 to catch up on a mortgage arrearage.

Part 2 of this post discusses the answer to the question, “Can I file for bankruptcy more than once if my previous bankruptcy filing was dismissed?”