Bankruptcy Basics: Chapter 7–The New Rule Is 8 Years!

In October 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. That Act changed the Bankruptcy Code rules about filing bankruptcies and imposed new restrictions. The new rule is that 8 years must pass inbetween Chapter 7 bankruptcies.

As a consumer bankruptcy attorney, I watch the court docket in Oregon. I recently saw in just one week, three hearings set on Debtor’s Objection to Denial of a Discharge. Being curious, I checked out the cases on the online computer system. Each of those cases were filed by people trying to represent themselves. Each of those cases involved a previous Chapter 7 bankruptcy in 2001. Every case had a letter written to the judge asking the judge to please let their Chapter 7 case go forward as the person was being hounded by debt collectors. And each of those cases was filed for nothing.  The hearing will result in the case being closed without a discharge granted.   It doesn’t matter what the letter says or what the person’s individual circumstances are, or how much the person begs.    The judge has absolutely no leeway in giving those people a discharge. The code is the code and the code says 8 years between filings. Now, if those people had come to see an attorney, the attorney would probably have suggested a Chapter 13 filing in order to get relief from debt collectors and depending on the individual timing, circumstances and facts, a discharge of debts could be granted.

Each of those people had sweated through the complicated forms, had done the required credit counseling, had managed to file their paperwork, had paid the credit counseling fee and the filing fee — all without an attorney. A bankruptcy will now show up on their credit reports. And none of the benefits of bankruptcy protection will apply to them. Their case will be closed and no discharge will be granted. That means, the debt collectors will be back trying to collect their money as soon as the case is closed. Hopefully, those people will make an effort to see an attorney, and the attorney will counsel them to convert their case to a Chapter 13 case.