Considerations for Filing Multiple Bankruptcy Actions or Re-Filing a Bankruptcy Action After Dismissal
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There are numerous provisions built into the Bankruptcy Code which restrain a debtor from abusing the system by filing for bankruptcy over and over again. This includes periods of time in which filing is barred and an inability to obtain multiple discharges during a specified length of time, to name a few. Further, dismissal of a bankruptcy action may have a negative impact on the debtor and provide some relief for creditors in a future action.
While there are only limited instances where filing a bankruptcy action is restricted, receiving a discharge may have some hurdles. A debtor cannot obtain a discharge in a Chapter 7 bankruptcy within eight (8) years of being discharged in a prior Chapter 7 or Chapter 11 action. 11 U.S.C. § 727(a)(8). If the prior bankruptcy was a Chapter 13, the waiting period for receiving a Chapter 7 discharge is six (6) years, unless 100% of the unsecured claim amounts were paid or 70% of the unsecured claim amounts were paid and the plan was proposed in good faith. 11 U.S.C. § 727(a)(9). A debtor must also wait four (4) years between receiving a discharge in a Chapter 7 action to file and obtain a discharge in a Chapter 13 action. While a debtor can file a successive action at any time, for instance file a successor Chapter 13 action to receive protection from the automatic stay and make payments pursuant to a confirmed plan, a discharge cannot issue at conclusion of the plan.
A restriction on the ability to actually file for bankruptcy protection occurs when a debtor’s bankruptcy action has been dismissed by the court for failure to abide by a court order or appear in court. In such an instance, the debtor may not re-file for bankruptcy protection during the 180 days after dismissal. 11 U.S.C. § 109(g). It is important to note that this waiting period is only imposed for willful conduct on the part of the debtor. The 180-day waiting period also occurs when a debtor voluntarily dismisses the action after a creditor has received relief from the automatic stay. Id.
The major consequence to re-filing a Chapter 7 bankruptcy action within 1 year of having a previous bankruptcy action dismissed is the effect on the automatic stay. In this situation, the automatic stay terminates 30 days after re-filing. 11 U.S.C. § 362(c)(3). Termination of the stay is automatic, requiring no motioning by the creditors in order to continue with collections efforts. In order for the debtor to continue the automatic stay, a request must be made to the court prior to expiration of the 30-day time period. Id. The request must show that the re-filing was in good faith as to the creditors; otherwise, the automatic stay will terminate. The Bankruptcy Code sets forth factors to consider when making a determination of good faith. See 11 U.S.C. § 362(c)(3)(C). Having two or more prior bankruptcy actions dismissed within 1 year prior to the current action will not impose the automatic stay upon filing at all. 11 U.S.C. § 362(c)(4).
It is important to take note of these time restrictions as they could have a significant impact on discharging debts and receiving relief from collection activities. A debtor considering re-filing after a dismissal or filing a subsequent action after discharge, or creditors with debts tied up in such activities, should seek the advice of an attorney to assist with these issues.