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How Often Can I File Bankruptcy?

If you’ve decided to file bankruptcy, there is no need to feel shame. Bankruptcy is a legal process that was devised to assist individuals who have been enduring significant financial struggles, often due to factors outside their control.

Taking the steps to file bankruptcy means you’re serious about getting your life back on track. By taking advantage of bankruptcy as a tool to reduce your debt, you’re granting yourself a much-deserved “second chance,” as well as relief from the harassment of creditors and debt collectors.

We’ll be focusing on Chapter 7 and Chapter 13 when it comes to filing bankruptcy, as these are the most frequently filed categories.

Who Can Benefit from Filing Bankruptcy?

You may benefit from filing bankruptcy if you find yourself in one of the following situations.

  • You recently became unemployed.
  • You have an overwhelming amount of medical debt.
  • Creditors are threatening to take you to court for not paying your debts.
  • You’re facing wage garnishment.
    • This occurs when you’ve defaulted on a loan (failed to make payments according to the lender’s terms) and a court orders your employer to withhold a portion of your wages and send it to one of your loan providers instead.
  • You’re at risk of foreclosure because you’ve been unable to meet your mortgage payments.
    • This occurs when you’ve defaulted on a home loan and you’re at risk of having the lender repossess and sell your home.
  • Your vehicle may get repossessed.
    • This occurs when you’ve defaulted on a vehicle loan and the lender or leasing company who issued you the loan seizes your vehicle (often, with no notice).
  • You’re tired of creditor and debtor harassment.
  • You’re a businesses owner who can’t afford to pay your employees.

What Is the Process for Filing Bankruptcy?

Below is the general process for filing bankruptcy, whether it's under Chapter 7 or Chapter 13.

  1. Find an Experienced Attorney – You want a lawyer skilled in bankruptcy law to guide you through this daunting process. Filing bankruptcy involves a significant amount of paperwork and having legal counsel will ease your stress and grant you peace of mind by ensuring that you don’t miss any crucial steps.
  2. Gather Financial Records – Your attorney can advise you regarding which financial documents are necessary for your case. Examples include bills attesting to your outstanding debts as well as proof of your income, expenses, and assets.
  3. Seek Credit Counseling – You’re required to complete bankruptcy counseling 180 days before you file bankruptcy. This proves to the courts that you’ve seriously considered any alternatives to bankruptcy before officially filing. This counseling must be completed with a provider approved by the U.S. Justice Department. You can find approved credit counseling agencies in Tennessee through the U.S. Justice website. Once you receive a certificate of completion indicating you’ve taken the course, be sure to save it for when you file bankruptcy.
  4. File Your Petition – Your attorney can advise you how to file your bankruptcy petition according to the requirements for the specific category you’re filing under.
  5. Meeting With Trustee and Creditors – Once your petition for bankruptcy is accepted, a bankruptcy trustee will be put in charge of your case. A trustee is an administrator responsible for reviewing all your documents and ensuring all information is accurate and authentic. They’ll also recommend whether the court should approve or dismiss your case, as well as handle all your assets. During this meeting, creditors can ask you or your trustee questions relating to your case.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is also commonly known as “liquidation bankruptcy.” This category of bankruptcy is for individuals who neither make sufficient money to keep up with their payments nor have nonexempt assets to sell to pay off debt. Examples of nonexempt assets include:

  • Vacation home (for example, a second home where you don’t primarily reside)
  • Luxury vehicles, clothing, accessories, and artwork
  • Stamp or coin collections, family heirlooms, or musical instruments of significant value (provided you’re not a professional musician who relies on the instrument to make a living)
  • Investments outside of your 401k such as assets in bank accounts, stocks, or bonds

On the other hand, examples of exempt assets include:

  • Your primary vehicle—up to a specific value
  • Necessary clothing, household items, and furniture
  • Jewelry—up to a specific value
  • Benefits received through government assistance such as welfare, food stamps, social security, and unemployment insurance
  • Benefits received for an injury you’ve sustained

The goal of filing Chapter 7 bankruptcy is to have your debts wiped completely clean. Since most debtors who file Chapter 7 have little or no nonexempt assets to be liquidated, they can have the majority (if not all) of their debt discharged (or forgiven). When debts are discharged, you no longer must worry about paying them.

Debts that can be discharged include:

  • Credit card debt
  • Medical bills
  • Personal loans
  • Past-due utility bills
  • Student loans (but it’s very rare)

Debts that can’t be discharged include:

  • Child support obligation
  • Spousal support or alimony
  • Court-ordered fines
  • Any debt you might owe for involvement in a DUI accident
  • Certain types of taxes

Once you file bankruptcy under Chapter 7, you cannot file again under Chapter 7 for another eight years. If you wish to file again for bankruptcy but under Chapter 13, you must wait four years.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is also commonly known as the “wage earner’s plan” or “debt consolidation form of bankruptcy.” If your income is higher than the median household income where you live, or if you have a significant amount of exempt assets, then it’s likely that you should file for Chapter 13 (instead of Chapter 7) bankruptcy.

When you file Chapter 13, you will work with your trustee and the court to settle on a repayment plan. Over three to five years, you will make payments to your creditors. The higher your income, the longer your repayment plan is likely to be.

Once your repayment plan is complete, your remaining debts can be discharged or relieved to a level that is manageable for you, given your circumstances.

Once you file bankruptcy under Chapter 13, you cannot file again under Chapter 13 for another two years. If you wish to file again but under Chapter 7, you must wait six years.

What Kind of Benefits Does Filing Bankruptcy Offer?

Some of the benefits of filing bankruptcy can include:

  • You can keep your property and avoid foreclosure or evictions.
  • Creditor harassment must cease once you file for bankruptcy (this is known as “automatic stay”).
  • If you file Chapter 13, co-signers on your loans can also be protected from creditor harassment.
  • You can achieve a clean slate and, eventually, a higher credit score if you resolve to rebuild it.
    • Ways to rebuild your credit score include monitoring your credit, following a budget, and ensuring all bills are paid in a timely manner.

Are There Repercussions for Filing Bankruptcy?

Some of the drawbacks to filing bankruptcy can include:

  • Your bankruptcy can be visible on the public records section of your credit report for up to ten years, which may render lenders hesitant to issue you loans or a mortgage.
    • To reiterate—it’s essential to work toward rebuilding your credit score after filing bankruptcy to demonstrate that you’re responsible and taking this second chance seriously.
  • You may lose your second home or vehicle.
  • If you file Chapter 7, your cosigners can be liable (responsible) for paying off your debt and continue to receive calls from debt collectors (even if you’ve stopped receiving the calls).

Why It's Important to Hire an Attorney to Help You File for Bankruptcy

It’s understandable if you feel overwhelmed when contemplating the pros and cons of filing for bankruptcy, as well as the differences between the different chapters. After all, attorneys proficient in bankruptcy law have dedicated a substantial amount of time to researching this area of law, which is complicated and vast.

There are several possible risks of filing bankruptcy without an attorney. You could file the wrong chapter type, file incorrectly, or fail to protect your assets due to insufficient knowledge of how to handle the process.

You should seek legal advice regarding filing for bankruptcy today to avoid unnecessary problems in the future. Now is the time to start taking steps toward achieving a less burdensome life.

Call Us Today

At Conner & Roberts, PLLC, we put our clients first. We have decades of experience in handling bankruptcy, and we’re determined to find solutions.

You can trust our team to review your case with the utmost diligence, rigor, and compassion. You shouldn’t have to face financial predicaments alone, and we’re here to help you understand your options.

Call us today at (423) 299-4489 or submit your information here to schedule your free consultation.

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