Can You Really Declare Bankruptcy Twice?

Author: Paul Sikes

Okay, I'm going to provide you with a bit of fair warning before I begin. This article is going to contain a mini soapbox regarding credit and personal responsibility. You see, I've been asked whether it's possible to declare bankruptcy twice, and as you'll soon find out there is something desperately wrong with that question.

Far too many people are having financial troubles because of irresponsible spending and relying on credit card debt and other types of loans. We haven't learned to live within our means, and we simply live on credit that will sooner or later blow up in our face. You should always strive to improve your financial circumstances, but until you get there you should not try to live a lifestyle that you cannot afford.

If bankruptcy was necessary to give you a fresh start in your financial life (and this is something you should discuss thoroughly with a bankruptcy lawyer), then you should have use this as a new beginning and learned from your mistakes. If you continue to use the same reckless spending patterns, you will continue to build that end wind up in the same place.

Now I know that sometimes overwhelming debt and bankruptcy are the result of unsuspected expenses such as medical bills. In any case, however, bankruptcy provides you with a chance to wipe your slate clean (though at the cost of severely damaging your credit), and you should take advantage of this opportunity.

So by now you should realize that you need to take responsibility and do everything you can to avoid a second bankruptcy filing. However, if you're still wondering about the question above, the answer is that you can file for bankruptcy a second time after eight years have passed.

So if you filed for Chapter 7 bankruptcy and were successful (or if you went with Chapter 13 and paid most of your debts), then you will have to wait eight years before filing Chapter 7 again. But like I said before, you should do everything in your power to avoid this scenario.

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It seems as if not a day goes by that the credit industry does not try to make people who file bankruptcy appeared to be some form of deadbeat; that they are somehow trying to take it an edge of the system and of the many other hard-working American. Besides, as far as they are concerned no one could ever fail to pay legitimate debts. The truth of the matter is though, that many people find themselves in a position beyond their control which makes it impossible for them to pay off all their debts.

The choice of declaring bankruptcy should only be left for the those who need it the most though. It should be nothing less than the last resort possible for anyone to choose. When you become overwhelmed with way too much debt and you have no other option left, then and only then should you ever consider actually filing.

All across the nation the number of bankruptcies each and every single gear have increased. Many people will insist that this increase is because of people who are wanting to take advantage of the system; but this is not the case. Honest families all over the country continuously find themselves being unable to pay off their debts and have found no other possible solution to their financial.

Every once in a while somebody maybe each attempting to take advantage of the system, but this is a rare occurrence. Most of the hype which has been built up over the years has been built by the crediting agencies who stand to lose the most amount of honey in the event of a bankruptcy.

It may not be the right decision for you, but it will help you to start off with a clean and fresh slate. You just have to take the time to make a proper decision for the simple fact that you will be affected for many years to come should you choose to file for personal bankruptcy.

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There are a number of reasons why people decide to declare personal bankruptcy. Of course, they all come down to being in a situation whereby even with significant changes in spending habits, the people in question are still in over their head with debt. This article examines the four biggest reasons that people decide to declare personal bankruptcy in the USA.

1. To avoid losing their home to foreclosure. Chapter 7 bankruptcy has the potential to eradicate many debts altogether but absolutely does not guarantee that you will be able to keep your assets. However, if your debts are unsecured debts, the homestead clause protects your home from reclaim. However, if it is a debt secured against your house that you are behind on, such as your mortgage most commonly, then you might be required to file chapter 13 to arrange a payment plan, as chapter 7 will not eradicate this type of debt.

2. To avoid losing their car. Very much as with your home, if you have a car loan, this loan is secured against the car. It is wise here again to declare bankruptcy of chapter 13 in order that you can formulate a repayment plan to enable you to keep your vehicle.

3. To pay medical bills. It is becoming increasingly common for people to declare bankruptcy as a result of medical bills they simply cannot afford to pay. If you find yourself with an unforeseen medical emergency, particularly if you are under insured or even not insured at all, you can find yourself in absolutely abominable financial circumstances.

4. Unemployment is at a record high and not having a job, therefore not having an income, is a very common reason for people deciding to declare bankruptcy. And unfortunately, this reason is becoming ever more common in the current recession with unemployment rates soaring.

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Before you make the decision to declare personal bankruptcy, there are a number of things you should familiarize yourself with and take into consideration. For example, ask yourself prior to your decision to declare personal bankruptcy, whether you have absolutely any viable alternatives. If you do not have any other way to resolve your situation, then you should probably go ahead.

However, you should note that in 2005 there were some fairly controversial changes made by Congress to bankruptcy law. These changes were brought about by extensive lobbying by the credit industry. While many people who were eligible before the changes still are, it is now substantially more complicated to declare personal bankruptcy than it was. Essentially, the changes have been designed to really make absolutely certain that anyone filing really has a genuine need and definitely cannot afford to repay debts, before allowing them to declare chapter 7.

Chapter 7 bankruptcy is what most people consider to be 'bankruptcy' whereby many debts are simply wiped out without any need for a repayment plan. The changes of 2005, however, mean that before you will be able to declare, your income will be considered. If your income is below the median for the state in which you are filing, you should be granted declaration. However, if your income is higher then you will be required to go through a complex and detailed means test to document your finances in full detail.

If your means test deduces that you are not in full need of chapter 7 bankruptcy, then you can be ordered to file chapter 13 bankruptcy, which essentially works out a repayment plan for you for the outstanding debts you have. And though this will often mean an eradication of outstanding service charges and a lower interest rate, you will still have to pay back outstanding debts.

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Before you declare yourself bankrupt, you should take time to carefully consider all of your options as there may be better alternatives in your situation. You may be able to pay off your debt over time by bringing in additional income, or you can try working with creditors to reduce your overall obligation.

Even something as simple as transferring your credit card balances to another card with a lower interest rate can be quite helpful. Before you take this strategy, however, you should be careful since this is just another loan that you have to worry about. It will not solve your problems by itself, and if you continue with your current spending habits you could find yourself in an even deeper hole. Transferring to a lower interest rate can bring some relief, though, as part of a more comprehensive debt reduction program.

After going through all the alternatives, you may come back to bankruptcy as the best or only option for you in your current circumstances. This may be a bit discouraging for you, but it should not be a reason for despair. You do need to make sure that your decision has been well researched and that you understand the basic process.

You need a good lawyer to help you with your case because the process has become more complex with the recent changes in the bankruptcy code. There are also various laws which vary by states, even though there are Federal laws that provide some uniform standards. For example, declaring bankruptcy in California may not be the same as declaring bankruptcy in Texas, especially when it comes to your homestead exemption.

The homestead exemption, by the way, protects your house from creditors if you file for bankruptcy. For example, if you're trying to get rid of tens of thousands of dollars of credit card debt, your creditors cannot go after your house if your state has a homestead exemption. Of course, you still have to pay your mortgage, and you may still have to deal with foreclosure if you don't pay your lender for your house payments.

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Bankruptcy is the debt resolution of last-resort in the UK, and still carries with it a stigma. It is also the debt solution that has the most devastating affect on your ability to get credit or a mortgage in the future. It is difficult to separate fact from fiction in the area of bankruptcy, so what happens if I declare myself bankrupt?

It is important to note at this point that declaring yourself bankrupt is not something that you should do lightly, and you should seek qualified advice.

A very important point concerns your home if you own it jointly. There may be steps that you can take to sell your share of your home to your partner/another family member which would remove the risk of it being sold. Get specialist advice on this.

You will need to get a form from your local court that you will have to present when you declare bankruptcy. You should also check at this point what the current fees are for declaring yourself bankrupt (485 at the time of writing, or possibly 335 if you are on income support). This form will need to be filled in before you petition for bankruptcy.

Before visiting the court you need to be aware that any bank accounts that you have an interest in will be frozen. You therefore need to make sure that you have enough cash to provide for your basic needs until you are next paid.

You would normally make an appointment at the court to declare yourself bankrupt. In actual fact if you turn up with the correct forms and the payment without an appointment during normal court hours you have to be seen, but normal practice is to make an appointment. You will need to take the bankruptcy fees in cash (no cheques accepted). The court appearance will normally be a formality, and you will then be free of your unsecured debt immediately.

After you are declared bankrupt your bank accounts will be frozen and you will need to attend an interview to discuss your financial situation and the reasons for your bankruptcy. The insolvency service will want to find out whether you have any assets that can be sold to pay money into your bankruptcy. Also, they will go through your budget to see if you can afford to pay any money from your earnings towards your bankruptcy. All of this detail needs to be discussed with a qualified adviser, but it is worth pointing out one key fact. If you are part of a couple, then the insolvency rules do not apply to your partner, i.e. they cannot insist that your partner pays anything towards mortgage/rent or utility bills etc. This is very important since if you fill in the forms showing that you pay half of the mortgage/rent this may result in you having a monthly excess. If so, you will be ordered to pay some of this money to your creditors for up to 3 years (continuing after your bankruptcy is discharged). If you don't have any excess then you will be relieved of any responsibility for paying your creditors when you are discharged, which could be after only 6 months but certainly within a year.

The insolvency service will want to know if you have any assets that can be sold. They will only be interested in high value items such as your home, cars, boats etc. Current practice in the UK is that bankrupt's homes are very rarely visited to assess whether there are any personal items that can be sold. The time and effort is simply not worth the small amounts of money that would be raised (unless your home is full of antiques).

Your car may be at risk of being sold unless you can prove that you NEED it for work (i.e. you cannot travel to work by public transport).

If you live with a partner/family and own your own home (and haven't already taken steps to sell your share to someone else) then the insolvency service will not sell it for at least a year from the date that you are declared bankrupt. This can give time for your partner or another family to buy back your share.

Once your bankruptcy is discharged (normally in less than a year) you will be free to start re-building your life debt free. You will probably find it almost impossible to get unsecured credit for a number of years. Mortgages are more available, but the rates will be higher. It pays to shop around, because the rates on adverse credit loans can vary widely.

Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, it is a legal procedure that offers a fresh start for people who can't satisfy their debts. People who follow the bankruptcy rules receive a discharge - a court order that says they don't have to repay certain debts.

The consequences of bankruptcy are significant and require careful consideration. Other factors to think about: Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows you, if you have a steady income, to keep property, such as a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.

Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. Exempt property may include cars, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official - a trustee - or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait eight years after receiving a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much shorter and can be as little as two years between filings.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary by state. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.

Another major change to the bankruptcy laws involves certain hurdles that you must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a "means test." This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program.

Should I file a Chapter 7 bankruptcy?

It used to be that if for whatever reason, you found yourself drowning in a sea of debt, you could always depend on filing for bankruptcy as your last lifeline to solvency. The new bankruptcy law, effective as of October 2005, changes all of that. It is the largest overhaul of the United State's bankruptcy laws since the nineteen seventies.

The old bankruptcy law was weighted towards giving the debtor a break and helping him to regain his financial footing by allowing him to discharge some of his debts. The new law, however, is weighted much more towards giving the creditors a break and is meant to discourage bankruptcy filings by making them tougher to get. It is also meant to make sure that you will not be able to write off some of your debts at all.

This year, over one and a half million Americans will file for bankruptcy. Deciding to file for bankruptcy has never been an easy decision but the changes in the law make it more important than ever that you first look for viable alternatives before you file for bankruptcy.

Negotiated settlements

The best alternative to filing for bankruptcy is to work out some kind of negotiated settlement with your creditors. This is a very flexible alternative and can take many forms. Creditors do not like doing this but they recognize that it's much better than taking you to court and possibly risk getting nothing at all.

The most popular type is where the creditor will agree to write off a significant part of what you owe in return for a lump sum payment of a much smaller amount. Why would a creditor do this? In many cases it's simple economics. Lenders already have overhead built into the loan. They have already recouped all or most of their expenses through what you've already paid. The agreed upon lump sum will be designed to make up for the rest.

Another popular type of negotiated settlement is one where the debt is not reduced but merely delayed. This is great if, for example, you've had a hard time finding a job with enough income to support you but you are expecting job market conditions to change in the near future. In this case, you may be able to convince the creditor to let you "skip" a few month's payments until you get back on your feet.

If you meet certain conditions, many credit card companies will be willing to do this by what's referred to as "re-aging". In essence, they will bring your account up to date so you are no longer in arrears. The amount you owe may or may not be changed, depending on their policies. In some cases, it remains the same but the loan is simply extended. For example, if your last payment was due on March 2, 2009 and you receive a three month re-age, your last payment would be changed to come due on June 2, 2009.

Debt Consolidation

If you listen to television or radio commercials, debt consolidation is often offered as a panacea for bankruptcy. But debt consolidation does not typically reduce the amount you owe, it simply consolidates your debts into one payment. In addition, many debt consolidation services come with non-refundable upfront fees and other unnecessary "debt educational services" which rather than decreasing your debt load, increase it.

Unfortunately, because of the new bankruptcy law, you have fewer viable options than before. And it's more imperative than ever to seriously seek other solutions before filing bankruptcy.

For people who find themselves in more debt than they will ever be able to pay off, bankruptcy is a viable and much used alternative. Of course, anyone considering this route will have a number of concerns and questions. One common question is what is going to happen to their assets when and if they declare bankruptcy.

In order to explain this accurately, we should first take a look at the 2 different types of bankruptcy, chapter seven and chapter thirteen bankruptcy. With chapter seven bankruptcy, you will completely clear all debts in their entirety. The catch with this is that you are likely to be forced to forfeit a number of assets to make at least a partial contribution to the debts. Chapter thirteen bankruptcy does not wipe clear your debts. Instead, it formulates a payment plan that is manageable to you. It usually involves paying all or part of your outstanding debts within a period of up to five years. With chapter thirteen bankruptcy, you will not be required to give up assets.

This means that if you are in a position where you want to wipe clear you debt immediately, you will be required to obtain chapter seven bankruptcy and, as such, bankruptcy assets will be forfeited in order to see your contribution. In many cases, no bankruptcy assets are considered for forfeit, either because the person filing has none or because those they have are not substantial enough in value to make a worthwhile contribution.

But the question of bankruptcy assets does not stop there. Many people do have homes and cars to consider. You will be relieved to know that there is often an exception made for the home. However, if you have a mortgage to pay and are in such a position that you are filing for bankruptcy in the first place, you are very likely to find yourself at risk of foreclosure.

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