July 23, 2019

Re-filing Chapter 7 after the 2005 Bankruptcy Reform Act

Financial distress can put you on the couch,. Bankruptcy court might be less stressful.Have you previously filed for Chapter 7 bankruptcy protection?

Are you in a difficult financial situation again? You may be eligible to re-file.

On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer protection Act of 2005 (derisively referred to by the bankruptcy bar as BAPCrappa) became the law of the land.

It instituted the hated means test that, by using wholly arbitrary numbers, purported to determine whether or not a debtor was “abusing” the bankruptcy law by filing a Chapter 7 bankruptcy case when there was sufficient income to pay a portion of the debts.

While the means test eventually proved to be far less of a factor than was initially feared, it did result in massive filings immediately before BAPCrappa took effect. Across the country, tens of thousands of cases were filed. In bankruptcy court district and division, the Charlotte Division of the Western District of North Carolina, over 600 cases were filed in the week preceding the law taking effect.  This was close to twenty times the normal number of case filed in a week in our district.

In 2005, economic times were good.  Yet, there were many people facing financial difficulty. BAPCrappa stirred these folks into filing Chapter 7. Today, economic times are not so good. It is almost certain that a large percentage of those 2005 files and experiencing economic difficulty.  They have already filed bankruptcy once; is there any relief?

You may be eligible to file for Chapter 7 bankruptcy protection again

The answer to the question is that soon those people who filed Chapter 7 in 2005 will be eligible to refile Chapter 7.  The Code*  provides that a debtor who received a Chapter 7 discharge in a case filed within eight years of a second Chapter 7 filing in which a discharge was granted cannot be granted second Chapter 7 discharge.

Turn that around and you discover that if the case if the second case was filed over eight years after the first case was filed, the Debtor can be granted a discharge. Take a look, our magic date is October 17, 2005.

Any case filed on October 18, 2013, will be more than eight years after the effective date of BAPCrappa.

An example of two married couples eligible to file for Chapter 7 bankruptcy a second time

As an example Mary and Joe filed a Chapter 7 bankruptcy case on September 28, 2005. They now are in financial difficulty and need to file another Chapter 7 case. The will be eligible for a second Chapter 7 discharge by filing on September 29, 2013, or later.  They have passed the eight year period.

The same result applies to Sam and Sue who a filed Chapter 7 case on October 15, 2005. By waiting to refile until October 17, 2013, or later; they have passed the eight year threshold.

In summary, once eight years has passed after a prior Chapter 7 filing, someone in financial difficulty can file a second Chapter 7 bankruptcy case and receive a discharge.  It is the date that the first case that was filed that determines when the second case can be filed not the date of the prior discharge.

If you are in financial hardship, consider a bankruptcy counseling session as one of your options.

*11 U.S.C. §727(a)(8)