How Often You Can File For Bankruptcy

Experienced Chicago bankruptcy lawyers

The thought of filing for bankruptcy may be scary and something you never expected you would have to consider. Unfortunately, things happen in life that cause you to fall behind on payments to your creditors. Over time this debt will continue to pile up and become overwhelming. Luckily, filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy offers you a way to eliminate your debt. At DebtPros, a bankruptcy lawyer in Chicago will help explain to you your options to obtain the financial freedom you deserve. 

A frequent question asked when people call DebtPros is how often they can file for bankruptcy in Chicago or Illinois. In this blog, we will discuss the two different types of consumer bankruptcy chapters and how often you can file. The laws regarding how often you can file can be confusing, so it is important to speak with an experienced bankruptcy attorney to understand whether you are eligible to file.  

Explanation of Chapter 7 bankruptcy

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a bankruptcy case that does not require you to make monthly payments to your creditors. Instead, the trustee assigned to your case will review your petition and assets to determine if there are any non-exempt assets to liquidate or sell. The proceeds from this sale will be used to pay your creditors.

Some common examples of assets that may be liquidated include a bank account that has more than $4,000 in it, a house or vehicle that is paid off and has significate equity, or a lawsuit that you filed where you expect to receive significate proceeds. Before you file your case, however, your bankruptcy lawyer will review all your assets and let you know if there is a chance this may happen.

To qualify for a Chapter 7 case, you must pass the “means test” which looks at your gross income for the 6 months preceding your bankruptcy case filing. To pass this test, you must make under a certain amount of money to file. The amount of money you must make is determined by the median income for a household of your size.

Explanation of Chapter 13 bankruptcy

Chapter 13 bankruptcy is a reorganization of your debt and requires you to make monthly payments for three to five years. Upon filing, your bankruptcy attorney will file a proposed plan that details how much your monthly payments will be and how much each type of creditor will receive. For example, you can include a car note in your case, mortgage arrears, or just your unsecured debt which can sometimes be paid at a fraction of what is owed.

To qualify for a Chapter 13 bankruptcy case, you must have enough disposable income to fund your plan. Disposable income is your net income minus your necessary living expenses. This does not necessarily mean you need to have a job to file. Instead, you just need enough disposable income to make your monthly payments.

Unlike Chapter 7, Chapter 13 allows you to keep your assets – no property of yours will be sold by the trustee. Generally, Chapter 13 bankruptcy cases are much more complex than Chapter 7 cases. The case lasts 3-5 years and involves negotiations with creditors. Therefore, it is imperative you find a lawyer that you are comfortable working with and has extensive experience filing Chapter 13 bankruptcy cases in Chicago.

How often can you file a Chapter 7 bankruptcy case?

There are restrictions on whether you can file a Chapter 7 if you have previously filed for Chapter 7 and received a discharge.  The bankruptcy code does not limit the number of times you can file. But it does have a waiting period. If you filed a Chapter 7 bankruptcy case and received a discharge, you must wait 8 years to file another Chapter 7 case. This waiting period starts on the date you filed the previous case, not when your case was discharged.

If you filed a prior Chapter 13 case, it gets a little more complicated. You can file a subsequent Chapter 7 case 6 years after filing the Chapter 13 case. However, you do not have to wait if in your Chapter 13 case you paid your creditors 70%-100% of what was owed to them.

A discharged case means you completed your bankruptcy case successfully and obtained a discharge order eliminating your qualified debt. If you cannot file a Chapter 7 because of a prior discharge, sometimes it is best to wait until you are eligible to file another one rather than file a Chapter 13. When you call DebtPros, a bankruptcy attorney will fully review your case and determine when you are eligible to file.

How often can you file a Chapter 13 bankruptcy case?

The waiting period to file a Chapter 13 is much different than a Chapter 7 bankruptcy case. In fact, there is no specific waiting period to file a Chapter 13 case. But there are rules on whether your case would be eligible for discharge.

In most cases, the following waiting periods apply to file a dischargeable Chapter 13 case: 4 years from a previously filed Chapter 7 case; 2 years from a previously filed Chapter 13 case.

However, if there is an urgent need to file a Chapter 13 case before those time periods are up. You can file a Chapter 13 case that is a “no discharge” case. This means that you will not receive a discharge order in the case. For instance, if you pay your unsecured creditors 10% of what they are owed, and complete your case, the remaining 90% owed to your creditors will not be eliminated. Another option is to pay your creditors back at 100% to ensure when you complete your case, you have no more debt.

A no discharge case is never ideal but may be necessary to help save your vehicle, your house, prevent a lawsuit filed against you, or simply put a stop to creditors harassing or calling you. The “automatic stay” still applies in no discharge cases. This is what prevents creditors from taking those actions against you. Our bankruptcy lawyers will help you decide the best option for you.

Talk to a bankruptcy lawyer in Chicago now!

Bankruptcy is often the best option to give you a fresh start and eliminate your debt. Everyone’s financial goals and situations are unique. It is important to find an attorney who will carefully consider your situation and best advise you on the quickest path to financial freedom. Filing a Chapter 7 or Chapter 13 bankruptcy is a complex process. It is essential to seek guidance from an experienced attorney. If you are struggling to pay your debt, contact us now or call (312) 883-5422 to speak with a bankruptcy lawyer in Chicago.