Filing Bankruptcy for the Second Time
Most Americans will face a serious financial crisis at least once every ten years. When they're not prepared for the crisis or their emergency exceeds their resources, they consider bankruptcy relief. But what happens when a debtor who has already filed bankruptcy once is faced with a financial crisis? Well, despite popular myths, a debtor can file bankruptcy multiple times as long as they fall within certain prescribed time frames. A debtor can file Chapter 7 bankruptcy eight years after filing a previous Chapter 7 bankruptcy or they can file a Chapter 13 bankruptcy (and receive a discharge) four years after they filed Chapter 7 bankruptcy.
There are also some other factors they should consider:
Will they be able to get a bankruptcy discharge?
Technically a debtor could file Chapter 13 bankruptcy within four years of filing Chapter 7 bankruptcy but they would not be able to get a discharge. The debtor needs to determine if going through bankruptcy without receiving a discharge will offer them some benefits.
Are the majority of your debts unsecured or secured?
If a debtor's debts are mostly secured or even nondischargeable, then filing bankruptcy the second time around might not be beneficial. For example, if the debtor had $40,000 in secured, priority, nondischargeable debt and only $5,000 in unsecured debt, bankruptcy might not offer the benefits they need. On the other hand if only $5,000 are secured, priority, nondischargeable debts and $40,000 are unsecured debts then filing a second bankruptcy could offer huge benefits to the debtor. A bankruptcy attorney can help a debtor determine which debts can be discharged in bankruptcy.
Will the debtor's second bankruptcy filing solve their financial problems?
If the financial problems stem from debt which could be discharged in bankruptcy and not solely from a lack of income, then filing a second bankruptcy may be worth it.