Experts brace for an influx of repeat filings in 2013

June 05, 2013

Among the sweeping changes put in place by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) is a mandatory waiting period between bankruptcy filings. The length of the wait depends both upon the type of the previous filing and the type of bankruptcy protection sought now. For example, under the BAPCPA, there is now an eight-year mandatory wait between Chapter 7 filings, provided an Order of Discharge was entered in the first case, or between a Chapter 11 filing and a Chapter 7. Since there was an influx of first-time filings in 2005 before the BAPCPA went into effect, now that the clock is ticking down on the waiting period, experts are braced for a wave of subsequent Chapter 7 filings.

There are also required waiting times between other types of filings in which an Order of Discharge was entered in the earlier case, including a six-year wait between a Chapter 7 and a Chapter 13, four years between a Chapter 7 (or Chapter 11) and a Chapter 13, and two years between Chapter 13 filings.

Repeat bankruptcy filings are nearly identical to first-time filings, except in the situation where a bankruptcy action was filed - and dismissed - less than a year prior. In that situation, the filer loses some of the protections of the automatic stay that stops collection actions as soon as the bankruptcy has been filed. Even then, though, bankruptcy is still a very useful debt relief method and can provide the best opportunity for a fresh financial start.

Types of bankruptcy filings

So long as the mandatory waiting times have been fulfilled, the next step is to determine what type of bankruptcy is the best fit for a particular person's financial needs.

Chapter 7 is better known as a "liquidation" bankruptcy since it involves selling non-exempt assets and using those funds to pay creditors. Contrary to what many people believe, the majority of a filer's personal items - like a reliable vehicle, home furnishings, clothing and employment-related tools/equipment - are actually exempt from sale.

Chapter 13 approaches debt relief from a different angle, instead consolidating all debts into one monthly payment that lasts between three and five years. After the repayment period is done, remaining eligible debts are discharged. Chapter 13 bankruptcy is the best fit for people who have a steady income, are capable of making monthly payments and have the patience to stick with the dictates of the bankruptcy plan criteria for a number of years.

Regardless of the debt management option you choose, it is important to have at least a cursory understanding of how the bankruptcy process - including mandatory waiting periods - works before making a decision. For more information about bankruptcy or other debt relief methods, consult an experienced bankruptcy attorney in your area.

Article provided by Heller & Richmond, Ltd.
Visit us at www.affordablebankruptcychicago.com/