Bankruptcy is meant to provide debt relief to honest, but unfortunate individuals. For some, bad luck seems to hang around a while. For others, bad luck seems to have moved in permanently. Unfortunate individuals with continuing or reoccurring debts may find relief through the federal bankruptcy laws which can provide a third, or even fourth opportunity to start fresh.
Eligibility for Chapter 7 discharge
There are a few wrinkles in the law for repeat Chapter 7 filers. First, the federal law limits the availability of a Chapter 7 discharge if an individual has received a Chapter 7 discharge in a previous case. Specifically, Section 727 of the Bankruptcy Code states that a court may not grant a Chapter 7 discharge if:
the debtor has been granted a [Chapter 7 discharge] in a case commenced within 8 years before the date of the filing of the petition.
This section confuses many debtors and some bankruptcy attorneys. The time period is measured between filing dates, not discharge dates. To illustrate, suppose a debtor files her first Chapter 7 case on January 3, 2010, and she receives a Chapter 7 discharge. She is eligible to file a second Chapter 7 case and receive a discharge on January 3, 2018.
It does not matter under what chapter the original case was filed. For instance, if a case was filed as a Chapter 13 on January 3, 2010, converted to Chapter 7, and discharged, the debtor is still eligible to receive a second discharge on January 3, 2018 (8 years after the filing date). This is because the original case commencement date did not change, even though the debtor converted to another bankruptcy chapter.
Eligibility to be a Chapter 7 debtor
The time limit contained in Section 727 is not a statute of limitations and does not disqualify the individual from filing Chapter 7 bankruptcy. There is no general limit to the number of times or frequency an individual may file Chapter 7 bankruptcy. That said, a debtor is ineligible to be a bankruptcy debtor for 180 days after the Chapter 7 case closes if it 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
- after the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay.
See 11 U.S.C. § 109(g).
Applicability of the Automatic Stay
The Bankruptcy Code also limits the reach of the automatic stay in a case filed after a Chapter 7 discharge. The automatic stay is effective for only 30 days if you had a bankruptcy case pending within 365 days of the case filing. See 11 U.S.C. §§ 362(c)(3) and (4). The bankruptcy court may extend the automatic stay if your case is filed “in good faith” and you are not abusing the bankruptcy system. Even if the automatic stay is terminated, most courts find that the property of the bankruptcy estate is still protected from creditors. That may include your house or your vehicles. It would not protect you from garnishments of post-bankruptcy wages in a Chapter 7 case.
If lady luck seems to have lost your address, you may need to schedule another consultation with your bankruptcy attorney. A second Chapter 7 case may provide the means for another chance at a fresh start.