Many people who file bankruptcy find themselves in dire financial straits again and wonder if they can file for bankruptcy a second time. Depending on how long it has been since the previous filing, the answer may be yes.
Under the current bankruptcy law, a person can file another case under Chapter 7 of the Bankruptcy Code after 8 years. This is 8 years from the original date of filing, and the 8-year period applies whether the previous case was under Chapter 7 or Chapter 13. Chapter 7 is for people whose income is below the median income and allows them to eliminate all of their debts without paying anything back. Under the previous law, the waiting period was only 6 years, but is not 8 years.
If the new case is to be filed under Chapter 13, the waiting period is only 4 years, but if a Chapter 13 case is filed, there will be a monthly payment that has to be made for 3 or 5 years. A person who wishes to file and whose income is above the median income must file a Chapter 13. Anyone else who has enough income to make even a small payment each month may file a Chapter 13.
A recent client had Filed a Chapter 7 case only 6 years ago, but was having his bank accounts restrained and was suffering a garnishment at work. He was not eligible to file a case under Chapter 7, but could file under Chapter 13. His income was low enough that if it had been more than 8 years since the last filing, he could have filed under Chapter 7. However, to get the relief he needed, he filed under Chapter 13. And, because his income was below the median income, he had to make payments for only 3 years.
Although this client’s income was below the median, the payment he had to make was still less than the amount that was being taken out of his salary each week through the garnishment.
One of the reasons this issue is important now is that the current bankruptcy law, which went into effect in October 2005, is almost 8 years old. There was a tremendous rush of people who filed in the months leading up to the effective date of the new law, and all of those people are becoming eligible to file again because 8 years will have passed from the date of their first filing.
While is it not the best thing to have to file again, it often is the case that there is little a person could have doe to prevent a second filing. Since 2008 our national and local economy has been in a recession, and despite the stock market setting new high marks and businesses reporting good results, many people are out of work and have been out of work for long periods of time. For them filing bankruptcy may be the only alternative.
For those people who need to file again, and the 8-year period has passed, they would not have to go the route of a Chapter 13 and could file a Chapter 7, which requires no payments and is a way to another fresh start.
Allan Bloomfield practices bankruptcy law in Forest Hills, Queens. Contact Allan today for a free consultation.