There are several chapters of the United States Bankruptcy Code under which a person may file bankruptcy.
Chapter 7 Liquidation
Chapter 7 is the liquidation chapter under the United States Bankruptcy Code. A Chapter 7 liquidation is the sale of all of the debtor’s nonexempt assets in order to repay creditors.
After liquidation, the bankruptcy trustee uses the money from the sale to repay creditors. Dischargeable debts of the debtor may be discharged by the bankruptcy court.
The creditors of the debtor and the bankruptcy trustee are given an opportunity to object to the discharge of debt or debts after the debtor files the bankruptcy case. However, once a court determines discharge of a debt or debts is appropriate, creditors are prohibited from attempting to collect on those debts. That does not prevent debtors from voluntarily repaying these debts if they wish. A debtor might do this to protect his or her reputation or because he or if the creditor is a close friend or family member.
Filing a Chapter 7 Bankruptcy After a Previous Bankruptcy
Unfortunately, there are times when an individual who previously filed for bankruptcy, seeks to file a chapter 7 bankruptcy at a later time.
The court will deny a discharge in a later chapter 7 case if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within eight years before the second petition is filed.
The court will also deny a chapter 7 discharge if the debtor previously received a discharge in a chapter 12 or chapter 13 case filed within six years before the date of the filing of the second case unless:
- the debtor paid all “allowed unsecured” claims in the earlier case in full, or
- the debtor made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims and the debtor’s plan was proposed in good faith and the payments represented the debtor’s best effort.
Chapter 13 for the Wage Earner
Chapter 13 is the bankruptcy for individuals who have a regular income. This type of bankruptcy allows the debtor to keep his or her assets while trying to repay debts over time. The new time from under which the debtor has to complete the payments owed to the creditor is usually three to five years.
Filing a Chapter 13 Bankruptcy After a Previous Bankruptcy
There are also unfortunate circumstances under which a debtor who previously filed for bankruptcy seeks to file bankruptcy a chapter 13 bankruptcy at a later time.
A debtor is ineligible for discharge under chapter 13 if he or she received a prior discharge in a chapter 7, 11, or 12 case filed four years before the current case or in a chapter 13 case filed two years before the current case.