What Happens If You File for Bankruptcy Multiple Times?
Only the timing matters, New York attorneys sayBy Steph Weber | Reviewed by Canaan Suitt, J.D. | Last updated on October 17, 2023 Featuring practical insights from contributing attorneys Michael J. Kasen and Rachel L. Kaylie
Use these links to jump to different sections:
- The Diminishing Benefits of Multiple Bankruptcy Filings
- Filing for Bankruptcy a Second Time Under a Different Chapter
- Negotiating with Creditors
- What Assets Are Exempt Under the Bankruptcy Process?
- Some Types of Debt Aren’t Dischargeable
- Find an Experienced Bankruptcy Lawyer
According to the American Bankruptcy Institute, New Yorkers filed approximately 15,000 bankruptcies in 2021—and have filed more than 230,000 since 2014.
What the institute doesn’t track is how many of those filings came from those who’ve already gone through at least one bankruptcy.
The Diminishing Benefits of Multiple Bankruptcy Filings
“There’s absolutely nothing in the law that prevents somebody from filing bankruptcy multiple times,” says Michael Kasen, a consumer bankruptcy attorney at Kasen & Kasen. “But some of the benefits of bankruptcy are abridged or eliminated with successive filings.”
For example, Chapter 7 bankruptcy is the most common type of bankruptcy and generally seeks to discharge or cancel burdensome debts, such as credit card balances and medical bills. However, initiating more than one Chapter 7 in bankruptcy court within a few years diminishes the effects of two key benefits: automatic stays and discharges.
“The automatic stay acts as a temporary injunction preventing your creditors from taking any action to collect the debts,” says Kasen. “The second benefit is the discharge, which makes the automatic stay permanent, so the creditors are now forever barred from initiating a lawsuit, sending collection letters, or any other actions to collect the debts.”
A chapter 7 bankruptcy must be filed at least eight years from the previous bankruptcy, says Kasen. Assuming the debts of the first bankruptcy were discharged, filing a second bankruptcy sooner than that removes the ability to discharge debts contained in subsequent filings. The automatic stay has its limits, too. Multiple bankruptcies within one calendar year reduce the automatic stay to just 30 days, and in some instances, abolish it altogether.
Even then, though, all options aren’t off the table.
Filing for Bankruptcy a Second Time Under a Different Chapter
“If you need to file bankruptcy [before then], you can file a Chapter 13 bankruptcy four years after the Chapter 7 discharge,” says Rachel Kaylie, a personal and small business bankruptcy attorney at The Law Office of Rachel L. Kaylie.
Known as a reorganization, Chapter 13 uses a person’s disposable income to calculate a monthly payment plan for outstanding debts. The structured repayment usually lasts three to five years.
“The advantage to that is you keep your assets, so if you have a house with a lot of equity in it, then you can keep your house and pay your creditors,” says Kaylie.
Negotiating with Creditors
If you’ve filed a Chapter 7 within the past eight years and need to do so again before the time limit, negotiating with creditors about your financial situation may buy some time until you are eligible for another bankruptcy discharge.
A bankruptcy attorney can step in, manage the calls from creditors, negotiate repayment plans, and ease the stress on the individual. “And in another few years, we’ll be able to file and discharge this again,” Kasen says.
What Assets Are Exempt Under the Bankruptcy Process?
Almost universally, 401(k)s are an exempt asset in bankruptcy proceedings, says Kaylie. State and federal exemptions can protect additional assets, like your home, tools used for a job, jewelry, and vehicles, essentially prohibiting a fixed dollar amount from each category from being liquidated.
However, you’ll need to choose one set of exemptions—either state or federal—when filing.
“You don’t get to pick and choose and use the federal homestead exemption [alongside] the New York personal property exemption,” says Kasen. “You need to pick which set works best. Every client is a different analysis in determining if they’re going to use the federal or state exemptions.”
Some Types of Debt Aren’t Dischargeable
Experts note that most taxes are not dischargeable; neither are student loans or any money that was obtained via fraud.
If taxes and student loans represent the bulk of your debts, then a Chapter 7 bankruptcy is unlikely to help, says Kaylie. Instead, a Chapter 13 bankruptcy may make more sense, as it settles the debt and allows you to spread out the payments over several years.
Child support and alimony payments are also not dischargeable, not subject to the automatic stay, and not calculated in a Chapter 13 payment plan.
“Bankruptcy is more than just a fresh start; it is a way to move forward,” says Kaylie. “After I get the discharge [for clients], I give them the tools to move forward, rebuild their credit, and get back on track.”
Find an Experienced Bankruptcy Lawyer
If you are thinking about filing a bankruptcy case, consider consulting with an experienced bankruptcy lawyer for legal advice about your debt relief options and strategies going forward.
For more information about this area of law, including Chapter 7 and Chapter 13, the difference between secured and unsecured creditors, and debt consolidation, see our overview of bankruptcy law and related content.
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