The vast majority of Americans will experience some type of financial crisis at some point during their lives, and while some will figure out a solution without asking for outside help, others will not be so lucky, and need the relief Chapter 7 bankruptcy provides to overwhelmed debtors. Chapter 7 bankruptcy offers debtors the opportunity to discharge many types of debt, which effectively wipes them away without the need to repay any outstanding amount. This ability to discharge debt without the need to repay any amount to creditors is unique to America, and not really replicated in other countries. As a consequence, those experiencing financial difficulty may think that bankruptcy is exclusively the answer to their money troubles without exploring other options.

Filing multiple bankruptcy petitions within a short period of time can be viewed as abuse, subjecting the accused debtor to possible financial penalties and criminal charges. The Seventh Circuit Court of Appeals recently issued a decision about the consequences of serial bankruptcy filings in response to a case involving a person who filed five bankruptcy petitions, starting in 2003, to avoid paying fees to her condo association. A discussion of how frequently a debtor may file for bankruptcy without incurring negative repercussions, as well as what happens if abuse of the process is alleged, will follow below.

How Often can You File?

The law does not impose a numerical limit on how many petitions a person may file, but the availability of bankruptcy relief is limited to certain windows of time, depending upon the type of bankruptcy used. Specifically, if a person received a discharge in a Chapter 7 case, he/she may not receive another discharge for eight years. If the bankruptcy was under Chapter 13 (partial debt repayment), two years must pass before a bankruptcy court would be permitted to hear the case and grant the requested relief. Thus, while a person may theoretically file an unlimited number of petitions, a court may not have the power to consider the matter unless the requisite amount of time has passed.

In addition, while the court cannot technically block a debtor from filing multiple petitions, if a bankruptcy case is dismissed with prejudice, which occurs if there are violations of court orders, multiple petitions were filed to delay creditors, or evidence of other abuse is found, serious consequences can follow. In these cases, the judge can prohibit a debtor from filing future petitions for a significant period of time, or bar the discharge of debts a person would have otherwise received.

Consequences for Too Many Petitions

Bankruptcy is a valuable tool when foreclosure threatens to take away a person’s home, as it gives him or her extra time to negotiate with the lender, or figure out an alternative arrangement. This benefit primarily comes in the form of an automatic stay (no chapter of bankruptcy can eliminate this secured debt), which temporarily stops the lender from scheduling and holding an auction. However, in cases in which more than one bankruptcy petition is dismissed and another filed within the same year, the automatic stay is reduced to 30 days. Two or more dismissals within the same year means no automatic stay applies if another petition is filed. Essentially, this type of pattern is typically viewed as an abuse of process and bad faith in order to delay creditor claims or frustrate court proceedings.

Returning to the case mentioned above, the five-time bankruptcy filer ended up sentenced to 46 months for bankruptcy fraud. Consequently, an experienced bankruptcy attorney should be consulted before filing to ensure no major red flags or problems are likely to follow.

Get Legal Advice

Overwhelming debt does not need to be a life sentence. Bankruptcy may be able to provide the help you need to start over and get your life back. Christopher L. Arrington, P.C. understands the stress financial worries can create, and can evaluate your situation for possible legal options. Contact the Danville law firm to schedule an appointment today, and learn more.