The Time Limits Of Bankruptcy Filings

I am not a lawyer, I am a judgment referral expert (Judgment Broker). This article is only my opinion, about the laws I have read, and what I have learned. Nothing in any of my articles should ever be considered legal advice.

In my line of work, I often hear "My judgment debtor cannot go bankrupt" or "My judgment debtor cannot go bankrupt again". There is very little that prevents a debtor from filing for bankruptcy protection as often as they wish. However, those that file more often than the law allows, will have eventually have their request denied (dismissed).

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Some debtors file for bankruptcy protection so often, they annoy the courts, and have been labeled "serial bankruptcy filers". Here is a summary of some of the recent changes to laws to help thwart serial bankruptcy filers:

Serial bankruptcy filers will learn that their protection from creditors will now last only 30 days, if the debtor had previously filed for a (dismissed) bankruptcy within the preceding 12 months. Even better, there will be no bankruptcy allowed (and no protection at all from creditors) if the debtor had more than one previously dismissed bankruptcy within the preceding 12 months.

One loophole for serial bankruptcy filers, is that even if their Chapter 7 bankruptcy case was dismissed for abuse, and the debtor files again under a new chapter (for instance Chapter 13), the conventional protective stay from creditors remains.

Another change, for serial bankruptcy filers is that debtors cannot file for a new bankruptcy case for 180 days, after a previous case was dismissed - if the dismissal was either because they willfully failed to comply with an order of the court, or if they agreed to a creditor's request for relief from their automatic bankruptcy stay.

If your debtor is a frequent bankruptcy filer, you could find the case numbers of their recent filings for bankruptcy (in all districts) and look for dismissals or terminations, and be prepared to present this information, should you choose to appear in court.

Bankruptcy is serious. The petitioner is legally presumed to be bankrupt 90 days prior to the date that their petition is filed. If a creditor takes a collection action even one day after the filing of a debtor's bankruptcy, they have violated the automatic stay mandated by federal law.

If you try to collect from the debtor at any time between the date they filed for bankruptcy protection, and when their case is either dismissed or terminated, you have violated the automatic stay. If you do this accidentally, return the money to the debtor immediately.

If it was an accident, and you return the money to the debtor as soon as you learn of their bankruptcy, you will probably be OK. If you do not return the money to the debtor after learning of their recent bankruptcy, you may be judged to have willfully violated federal law, and will be subject to paying massive sanctions, damages, and attorney fees (and will also have to return the debtor's money.)

Once you receive notice of a bankruptcy, it does not matter if you have not already received the funds directly. For example, if you had the sheriff levy the debtor's bank account the day after they filed for bankruptcy, it is your duty to take any actions required to make sure the funds are returned to the debtor. In a levy situation, you would inform the sheriff in writing of the bankruptcy, and ask them to return the funds to the debtor.

Because of bankruptcy hassles, costs, and risks of violating federal law, a debtor merely starting the process of filing for bankruptcy protection causes most creditors give up and walk away, and never look back.

Debtors know that most creditors will walk away when they file for bankruptcy. Possible violation of a debtor's bankruptcy is something to be mindful of, however a smart creditor will monitor the debtor's ongoing BK status. Unless the debtor is really very poor. In that case, why bother trying to collect at all?

Few creditors are savvy enough to look on PACER on a regular basis, to monitor the status of the debtor's bankruptcy to see if it succeeds (their debts are discharged), or is dismissed or terminated (their bankruptcy attempt failed).

To bring a serial BK filer to the court's attention, one can use PACER to monitor the financial paperwork, which the debtor is required to file with the court within 15 days of filing their petition.

One can appear at the 341 meeting of creditors. The debtor's paperwork may contain some helpful information, and maybe a few inconsistencies, which you can optionally explore during your 5-minute appearance at the 341 meeting of creditors.

The time limits for a debtor filing for bankruptcy again ranges between 2 and 8 years.

A debtor cannot get a discharge in a Chapter 7 bankruptcy case if the debtor previously got a Chapter 7 discharge within the past 8 years, or 6 years if they had previously filed a Chapter 13 case. The time periods in either case is measured from the filing dates, not the final results of the previous bankruptcy attempt. (See Federal Laws 11 USC 348a, and 11 USC 727a).

If the debtor had filed for a Chapter 7 bankruptcy case, they must wait for 4 years before filing again for a Chapter 13 bankruptcy. (See Federal Law 1328f1).

If the debtor filed for a Chapter 13 bankruptcy case, they must wait for 2 years before filing again for a Chapter 13 case. (See Federal Law 1328f2).

Debtors are not allowed to have two bankruptcies open or pending at the same time.

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