The bankruptcy law limits how often you can file a second case. A lot has been written about so called “serial filers” – property owners who file multiple Chapter 13 cases to thwart foreclosures, but what about debtors who successfully complete their Chapter 13 or who receive a discharge in a Chapter 7 but find themselves in trouble a few years later.
This morning, I received the following email from a potential client:
I filed Chapter 7 bankruptcy in October 2005, and ow my car has been repossessed. What are my options because I owe $17,000 and I know they wont get that for the car when it is sold at the auction.
The short answer is that you cannot file another Chapter 7 for eight (8) years from the date you filed your Chapter 7 – in this case sometime in October, 2013. You cannot file a Chapter 13 and receive a discharge for four (4) years from the date of filing your Chapter 7 – in this case, October, 2009.
You could file a Chapter 13 for the purpose of paying back some or all of the repossession deficiency but you would not be eligible for a discharge.
What can we learn from this situation:
- be very careful about reaffirming debts in Chapter 7. In this case, the debtor reaffirmed a vehicle loan but end up not being able to pay the debt. I think that far too often debtors reaffirm debts in Chapter 7 without thinking through the implications. When you reaffirm a debt in Chapter 7, it becomes, in essence, a non-dischargeable debt. In my view if you can come out of your Chapter 7 with no debt and no installment obligations. You are far better off saving up your money to buy an inexpensive vehicle for cash.
- although a Chapter 13 would still be available, it most likely does not make any economic sense. Chapter 13 has become so complicated that most attorneys charge between $2,500 and $5,000 for Chapter 13 cases. If this debtor ends up owing $10,000, it clearly does not make sense to pay $2,500 for the right to pay that $10,000 over five years in a Chapter 13.
- Most likely the best option for this individual is to try to work out a payment plan or subject his/her wages to garnishment. In my view, his/her situation is not one that is solvable by bankruptcy.
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