Filing More than One Bankruptcy Case – Ability and Effect

The Bankruptcy Code does not specifically state the number of bankruptcy filings that are permitted for any one entity. However, every bankruptcy petition must be filed in good faith and with good intentions. Also, a Chapter 13 and Chapter 11 case must be feasible, in that the debtor has the ability and monthly disposable income to make the required payments.

An individual or entity will not receive a discharge in a Chapter 7 if the debtor received a prior discharge in a Chapter 11 or Chapter 7 within 8 years before the filing of the present case. This means that the debtor must wait at least 8 years to file a Chapter 7 bankruptcy case after the filing of a prior Chapter 7 of chapter 11 bankruptcy case.

Also, in general, a Chapter 7 debtor is not entitled to a discharge if the debtor was previously granted a prior Chapter 13 discharge regarding a previous Chapter 13 case that was filed within 6 years before the date of the present Chapter 7 bankruptcy filing. There are two exceptions in connection with a prior chapter 13 filing and a subsequent chapter 7 filing. The first exception is when the debtor pays 100% of their unsecured debt in their prior chapter 13 filing. The second exception is when the debtor pays 70% of their unsecured debt in the prior Chapter 13 case and the plan of the prior chapter 13 was proposed in good faith and the debtor made their best effort to make payments in the Chapter 13.

A Chapter 13 debtor is not entitled to a discharge in the event that the debtor received a previous discharge in a prior Chapter 7 or Chapter 11 case that was filed within four years proceeding the filing of the current Chapter 13 case. Also, a Chapter 13 debtor is not entitled to another Chapter 13 discharge in a case filed within two years of the current case filing. The above listed limitations do not mean that one cannot file a chapter 13 for reasons other than receiving a discharge of debt.

In general, when an individual files a Chapter 7 or Chapter 13 bankruptcy case in New Jersey, the date and time of the actual filing acts as an automatic stay in connection with any and all actions regarding the commencement or continuation of an action against the debtor. This means that as of the time of the case filing, no creditor may pursue or proceed with any action against the debtor. However, there are exceptions to this rule with regard to subsequent bankruptcy filings.

In the event that a second bankruptcy case is filed within one year, after the dismissal of a prior Chapter 7, Chapter 11, or Chapter 13, the automatic stay of the subsequent filing is in place for only thirty (30) days after the filing, unless or until the court extends the automatic stay, for the life of the case. Typically, this issue relates to a subsequent Chapter 13 filing after the dismissal of a debtor’s prior chapter 13 case.

Prior to the thirty (30) day period, the debtor must file papers with the court requesting that the judge sign an order extending the automatic stay. The judge will extend the automatic stay if the debtor provides proof to the court of the debtor’s “change in circumstances”. The debtor must provide sufficient proof to the judge as to either an increase in income and/or a reduction in expenses that would provide monthly disposable income sufficient to make their monthly trustee payments, in addition to their required monthly expenses. In other words, the debtor must explain how he is now able to make the monthly trustee payments, even though the prior case was dismissed, due to a failure to make trustee payments. If the judge denies this request, the debtor may not proceed with the second case.

In the event that there were two cases dismissed within the one year prior to the subsequent bankruptcy filing of the third case, the automatic stay is not in place at the time of the filing. This means that, initially, after the filing, the bankruptcy filing has no effect with regard to any creditor’s ability to commence or continue an action against the debtor for collection of debt and/or property.

However, the debtor may apply to the court for an order to reinstate and extend the automatic stay for the balance of the Chapter 13 bankruptcy plan. Also, again, the debtor must provide the same proof  regarding a “change in circumstances”. There are additional reasons as to why an individual may be unable to file a case. However, these additional reasons are unusual and beyond the scope of the website.

Robert Manchel, Esq., is available to discuss your bankruptcy options.