Theoretically, people can file Chapter 7 bankruptcy as many times as they want. However, subsequent filings have limited effects, both on the Automatic Stay and debt discharge. Typically, a subsequent Chapter 7 has a full effect either six or eight years after the first filing. The ten-year residual credit history waiting period might apply as well. Chapter 7 filings usually stay on credit reports for a decade.

The Automatic Stay and debt discharge are two of the biggest advantages of bankruptcy. Additionally, bankruptcy protects your core assets, such as your house, motor vehicle, and retirement account, from creditor seizure.

An Athens bankruptcy lawyer helps individuals and families take full advantage of bankruptcy’s benefits. Additionally, attorneys give debtors the tools they need to make the most of their fresh starts and quickly rebuild their credit scores after bankruptcy filings. Do-it-yourself filers and people who work with bankruptcy petition preparers might save a little money, but they are cheating themselves out of these much greater long-term benefits.

Subsequent Bankruptcies and the Automatic Stay

The basic rule in this area, as codified in the Bankruptcy Code, is relatively straightforward. The relationship between multiple filings and the Automatic Stay is:

• One Prior Dismissal: The Automatic Stay does not take full effect unless an Athens bankruptcy lawyer files a motion to extend the stay. Typically, judges grant these motions without asking questions or requiring hearings.
• Two Prior Dismissals: At this point, things are a bit dicier. Once again, the Automatic Stay only takes full effect if an Athens bankruptcy lawyer files an appropriate motion. Typically, the judge only grants this motion if the debtor shows good cause for the prior dismissal. “Good cause” could be almost any valid reason, such as a paperwork SNAFU or changed financial circumstances.
• More than Two Prior Dismissals: Even the best Athens bankruptcy lawyer might not be able to win a motion to extend the Stay in these circumstances. There is a strong presumption that the debtor is a serial filer.

Serial filers are people who try to cheat the system by filing multiple times without ever intending to follow through on their filings. Things become even more complex if different entities file bankruptcy over essentially the same debts.

Assume Molly is a partner with her husband, Dexter, in Molly LLC. To frustrate business creditors, Molly files Chapter 7 bankruptcy in January and voluntarily dismisses her case the next month. A few months later, Dexter files bankruptcy and voluntarily dismisses his petition. A few months later, Molly LLC files bankruptcy.

Technically, Molly LLC is a first-time filer and eligible for the Automatic Stay. However, a judge might invalidate the Stay because of Molly’s and Dexter’s prior filings.

Generally, these serial filer rules only apply to dismissals within the last six months. Debtors have the power to unilaterally dismiss their petitions at almost any time. They voluntarily file petitions, so they can voluntarily un-file them. 

Judges often dismiss bankruptcies because of failure to comply with the trustee’s requests. Other grounds for involuntary dismissal in Chapter 7 include failure to appear for the 341 meetings and missing a paperwork filing deadline. 

Athens Bankruptcy Lawyers and Subsequent Discharge

The aforementioned six and eight-year waiting periods are debt discharge waiting periods. Debtors can still file voluntary petitions before then. And, if they have no dismissals on their records, the Automatic Stay usually takes full effect. However, the judge will not issue a discharge order at the end of the bankruptcy.

Some people file a Chapter 7 following a Chapter 13, or vice versa, simply to take advantage of the Automatic Stay. This tactic, which is perfectly legal, is outlined below.

The waiting period rules vary slightly in some cases. For example, if the debtor paid 70 percent of unsecured debts in the prior bankruptcy, either directly or through reaffirmation, the judge might reduce the discharge waiting period to only two years.

“Chapter 20” Bankruptcies

As mentioned, the Automatic Stay and debt discharge are two of the biggest bankruptcy perks. Sometimes, these two things come in unusual combinations.

Let’s return to the Molly bankruptcy example and change the facts. Now assume Molly and Dexter jointly file Chapter 13 because the lender is threatening to foreclose on their home. They catch up in three years and the judge closes the bankruptcy. Then, Molly LLC goes out of business. The couple has no income for two months. Then, Molly finds a new job.

If the lender threatens to foreclose because of the two missed payments, which could happen, Molly and Dexter could jointly file another Chapter 7. The Automatic Stay stops the foreclosure. And, since the case remains open for at least another six months, Molly and Dexter have plenty of time to erase the delinquency.

Alternatively, many people file Chapter 20 bankruptcies because they cannot afford their Chapter 13 debt consolidation payments. So, they convert to Chapter 7 and receive their fresh start much sooner.

People can file subsequent Chapter 7s at any time, but subsequent filings often have limited effects. For a free consultation with an experienced Athens bankruptcy attorney, contact Morgan & Morgan, Attorneys at Law, P.C. Convenient payment plans are available. Call us on 706-843-2905. 

Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.