This turbulent economy has not been very forgiving for many Americans. Thousands of hard working people have been borrowing more money to make ends meet and keep their house out of foreclosure. Many people are now suffering the devastating effects of overwhelming debt they cannot afford to repay. Fortunately, bankruptcy is one option that can provide relief from such debt. But what happens to those that have already filed bankruptcy in the past and are now in need of help once again?
Fortunately, the law does not limit how many times a person can file for bankruptcy. However, there are laws that dictate how often a person can file for bankruptcy and how often they can receive a discharge of their debts. There are also rules as to which type of bankruptcy you may file for after you have filed in the past.
If you filed a Chapter 7 case in the past and obtained a discharge of your debts, you will be required to wait 8 years to obtain another Chapter 7 discharge. If your previous case was a Chapter 13 case, you only need to wait 6 years to receive a discharge for a Chapter 7 bankruptcy. However, if you did not receive a discharge in your previous case, you can file again at any time.
If you filed a Chapter 7 case in the past and obtained a discharge of your debts, you will be required to wait 4 years to obtain a Chapter 13 discharge. If your previous case was a Chapter 13 case, you only need to wait 2 years to receive a discharge for a Chapter 7 bankruptcy. Again, you are free to file again at any time if you did not receive a discharge under your previous case. However, if your case was dismissed due to failure to comply with a previous Chapter 13 repayment plan, you may be required to wait before filing. This period of time may be specified by the court upon dismissal of your previous Chapter 13 case.
When a couple decides to file for bankruptcy, there are several things to consider about when is the best time to file. Filing for bankruptcy before a divorce can often make the process much easier than filing after a divorce. In a divorce, assets must be divided and shared debts must be managed. There are many differences in bankruptcy laws per state and filing together or separate could be affected by these differences.
Bankruptcy Before Divorce
The transition into a divorce is much easier on a couple if they have reconciled their bankruptcy while they were still legally married. As a couple, filing together or separate can also impact the outcome of your bankruptcy case. There are many advantages in filing separately in marriage. You can file your own bankruptcy from your spouse, or one spouse may be the only one to file. One advantage of filing separate from a spouse is to protect the credit standing of the non-filing spouse. This is particularly helpful if one spouse accumulated the majority of the debt. However, if you receive a discharge on a debt, the non-filing spouse may still be held liable for any shared debts.
Filing together may be the better option if there are more shared debts than individual debts in a marriage. Shared debts, or debts accumulated on joint accounts, that are discharged in bankruptcy will release both individuals from liability of those debts. Also, shared assets may be better protected under exemption laws when filing together. One disadvantage to filing together is whether the combined incomes are high enough to disqualify them from eligibility for bankruptcy protection.
Bankruptcy After Divorce
The biggest issue in filing after a divorce is regarding how debts are managed and the possession of assets. Debts accumulated on joint accounts during marriage are handled similarly in bankruptcy as in filing separately in marriage. The non-filing spouse may still be held liable for the debt if the filing spouse receives a discharge. It will be more difficult to satisfy the creditor if they know there is still one spouse that did not receive a discharge and can be held solely responsible for repaying the debt.
Most assets are divided in the divorce process and each spouse may take possession of certain assets. If you file for bankruptcy and the court allows for a particular asset to be liquidated in order to satisfy your debt, that asset can be taken from the non-filing spouse. There is no protection for assets that are in a non-filing member’s possession and any of the assets that were shared in marriage may be at risk for seizure during bankruptcy.