Can You Declare Bankruptcy More Than Once?

It’s no secret that Americans are addicted to credit cards. If you tally up the amount of personal debt most households owe, it far outweighs the entire national debt. Sometimes these issues develop because of poor financial planning, but more often than not it is circumstances beyond your control that create an untenable situation. During the recession millions of people lost their jobs, and many of them spent more than a year out of work, desperate for any type of employment. That delay in income generation eats through savings accounts and emergency funds, leaving you forced to purchase daily necessities on your credit cards. For others, it is unexpected medical issues that cause the problems, with bills piling up with or without medical insurance. Regardless of the reasons, many people find declaring bankruptcy to be the only way out. But what if circumstances align against you a second time, and despite all of your best efforts you can see no other way to manage your new debt? Can you declare bankruptcy more than once?

The answer is ‘yes’, but it isn’t entirely simple. First of all, you have to understand the various types of bankruptcy you can pursue. The most common way people go about this is what is known as Chapter 7 bankruptcy. Also known as straight bankruptcy, this is a basic liquidation of your assets. Everything you own is doled out to the creditors you owe money to, and then the slate is wiped clean. The bankruptcy will remain on your credit report for ten years, and will impact your buying and borrowing power during that time. It’s not a black hole, and most people still manage to handle their lives with this clean slate in front of them.

The other option is Chapter 13 bankruptcy. This is a little bit more complicated, but it allows you to keep some of your property. Also referred to as a reorganization bankruptcy, you’ll be given up to five years to pay off your consolidated debts, while holding on to your assets. At the end of that five year period, the remaining debt will be discharged. In both cases the courts are involved, and you’ll have to be approved to proceed.

The rules are different for each option when you get into the process of declaring a second bankruptcy. If your goal is to file another Chapter 7, the gap must be at least six years between the first and second filing. There are a couple of exceptions to this ruling. First of all, if you fully paid the allowed unsecured claims in your earlier case, you will be granted the second bankruptcy. The same may be true if you paid 70% or more of what was owed, and it can be proven that you dealt truthfully and gave your absolute best effort.

Filing a second Chapter 13 bankruptcy is far simpler. You can refile basically at any time. In fact, you can also file for a Chapter 13 bankruptcy after filing a Chapter 7 bankruptcy, and the mix won’t cause any problems. This is how people will often handle paying off additional debts that for some reason weren’t covered in the additional filing. Keep in mind that you should probably bring a bankruptcy law firm on board to assist you through the process. They won’t be cheap, but you will need their assistance for something this complicated.