One of the most common questions we receive, hands down! So common that the
bankruptcy community came up with a title to easily remember. The
2-4-6-8 rule!!
As with all bankruptcy questions,
the start of the analysis begins with “well, it depends on which chapter
you file.” There are two types of bankruptcies an individual can file: a
Ch. 7 and a Ch. 13.
A Ch. 7 bankruptcy is commonly called a straight bankruptcy, or straight
liquidation of your debt. The Court views your situation (income, expenses,
current assets and dependents, etc.) as you not having the ability to pay back
your creditors anything; therefore, you will not in this particular type of
bankruptcy. You just gather your documents and file the case, attend the court
hearing, and wait for a discharge without paying your unsecured creditors back
anything. Now, with a Ch. 7, you must be under a certain amount of income for
your household size, be current on payment for any mortgages or cars you want
to keep, and cannot have over a certain amount of equity in your assets (like
an expensive, paid-off home, or many paid-off vehicles that are worth something
of substance).
A Ch. 13 bankruptcy is often called the repayment plan back to the Court,
where your unsecured debt (and in some instances your secured debt) will be
paid back over a certain number of years (3-5 typically) at a small percentage.
You can catch up your house or car payments through this bankruptcy plan, and
this will repay old and current tax debt, along with other regular unsecured
debts. An individual or couple is placed in a Ch. 13 because of their higher
income of the household, certain equity in assets they have, or any secured
debts they want to keep that they are behind on at the time of filing.
Now for the timing of the filings…
2 Years: Ch. 13 –> Ch. 13
A person who has filed a Ch. 13 bankruptcy and received a discharge (meaning all required payments to the Court have been completed), can file
a new Ch. 13 2 years after the date of filing for their first case. Say
someone filed a Ch. 13 on January 1, 2018 and completed their case. They could
file a new Ch. 13 on January 1, 2020. This is a slightly strange rule because someone
must stay in their Ch. 13 case for a minimum or 3 years anyway, so if you
complete one Ch 13 case, obviously two years has gone by, and you are eligible
for a new Ch. 13.
4 years: Ch. 7 –> Ch. 13
A person who has filed a Ch. 7 and received a discharge, can file a Ch. 13
just 4 years after the filing date of their Ch. 7. If someone filed
their Ch. 7 on January 1, 2015, and got everything discharged at that time,
they could file their Ch. 13 after January 1, 2019, and work in the repayment
plan back to the Court for any new debts they have acquired in those four
years.
6 Years: Ch. 13 –> Ch. 7
You can file a Ch. 7 bankruptcy after you filed a Ch. 13 and received a
discharge 6 years previously from the filing date of the 13. Everything
in bankruptcy usually goes off filing dates, but if you did not complete a chapter
and there was no foul play found by the court, it is as if you never filed it,
because you did not receive the privilege of a discharge anyway.
8 years: Ch. 7 –> Ch. 7
This is the largest gap between filings. That is due to debtors not having to
pay anything back to their creditors in a Ch. 7, so you should wait the longest
period, 8 years between Ch. 7 filing dates, before being eligible to do
that all over again.
Conversions are slightly tricky. A conversion happens when someone in a Ch. 13 has changed circumstances, and they “convert” their case to a Ch. 7. Feel free to call our office for more information on that if it applies to you!!
Disclaimers:
***Just because you are eligible timewise for a certain chapter, does not mean you automatically get to file it! If circumstances (income, dependents, assets) have changed, then those changes may dictate which chapter you can file regardless!
***This was A LOT of brief information. Of course, EVERY CASE IS DIFFERENT with unique personal situations or assets that must be addressed and very well may put someone in a different chapter of bankruptcy than they expect. Any questions at all, we can assist you and steer you in the right direction.
Give the office a call now at 859-581-5516 to go through any questions and information, so we can set you up for your best personal outcome!