What Happens If You File for Bankruptcy Multiple Times

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.

“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 is the most common type of bankruptcy and generally seeks to discharge or cancel burdensome debts, such as credit card balances and medical expenses. However, initiating more than one Chapter 7 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.”

Chapter 7 bankruptcies must be filed at least eight years apart, says Kasen. Assuming the debts of the first bankruptcy were discharged, filing 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.

“If you need to file bankruptcy [before then], you can file a Chapter 13 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.

If you’ve filed a Chapter 7 within the past eight years and need to do so again, negotiating with creditors can buy some time until you are eligible for another discharge. A bankruptcy attorney can step in, manage the calls from creditors, and ease the stress on the individual. “And in another few years, we’ll be able to file and discharge this again,” Kasen says.

Almost universally, 401Ks 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.”

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.”