Filing a Chapter 13 After A Chapter 7 Bankruptcy can be a difficult and stressful process, but it can also provide relief from debt that you may be struggling to repay. There are two common types of bankruptcy for individuals: Chapter 7
and 13. Each type has its own benefits and drawbacks, so it’s important to understand the
differences between them before deciding which one is right for you.
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There are a few situations in which it may make sense to file a Chapter 13 after
a Chapter 7 bankruptcy to discharge debts. This can be the case, for example, when you need
additional time to catch up on payments for debts that were not discharged in the earlier filing, or
when you require a more manageable repayment plan. It is important to note that, should you
choose this route, you must wait four years before being eligible to file for Chapter 7 again.
Chapter 13 & Chapter 7: What Are The Differences?
Bankruptcy can be a difficult and confusing process, but it doesn’t have to be. You can become
debt-free and start fresh with a clean slate. In a liquidation bankruptcy, also known as a Chapter
7, your nonexempt property is sold and the proceeds are distributed to creditors.
Generally speaking, nonexempt assets that could be sold to cover debts could include your home,
pension, car, personal belongings, coin collection, and even jewelry. However, many states have
their own set of exemptions that may differ from the federal exemption list.
Filing for bankruptcy can be a way to reorganize your debt and get a fresh start. In bankruptcy,
some or all of your debts may be discharged, depending on the type of bankruptcy you file. With a
chapters 13 bankruptcy, you repay your debts over time, usually three to five years.
Under chapter 13 of the bankruptcy code, your creditors are grouped together into a single pool.
You make monthly payments to a trustee, who then distributes the funds to your creditors. This
can help you get back on your feet financially and avoid foreclosure or repossession.
How Soon Can You File?
How often you are able to file for bankruptcy depends on what type of bankruptcy you’re filing, which
is determined by something called the 2-4-6-8 rule. Here’s a breakdown of how it works:
- Chapter 13 after chapter 13: Two years.
- Chapter 13 after chapter 7: Four years.
- Chapter 7 after chapter 13: Six years.
- Chapter 7 after chapter 7: Eight years.
Filing a chapter 13 after a chapter 7 bankruptcy is known as a chapter 20 bankruptcy. In this type of bankruptcy, you will not receive a discharge since you have not waited
the full four years. However, this type of bankruptcy can give you the time you need to pay down
your debt.
At least four years must pass after filing for Chapter 7 bankruptcy before debts can be discharged
through Chapter 13.
It is possible to file for Chapter 13 bankruptcy sooner than four years after a Chapter 7
bankruptcy, as long as no debts were discharged in the Chapter 7 filing. However, anyone who
wants to have their debts discharged in Chapter 13 who also had debt discharged in a previous
Chapter 7 filing must wait at least four years before doing so.
Filing A Chapter 13 After A Chapter 7
Filing for chapter 13 bankruptcy four years or more after filing for chapter 7 bankruptcy can result
in a very low monthly payment plan and a full discharge of any remaining balances owed after
completing the three- to five-year plan. For example, you may only have to pay $100 per month
for three years while in chapter 13, which leaves very little paid to creditors but still results in the
discharge of any remaining balances.
There are a lot of reasons why people might want to consider filing for bankruptcy. For instance, it
can be a good option for those who have student loan debt, certain types of income tax debt, and
child support payments to make. These things can’t be discharged in a Chapter 7 bankruptcy.
When Is It A Good Idea?
There are a number of reasons you might be filing a chapter 13 after a chapter 7, such as:
- Back taxes: Chapter 13 bankruptcy can provide some relief from back taxes that weren’t
dischargeable in a regular bankruptcy. Under Chapter 13, you may have up to five years to
pay those taxes. - Student Debt: Chapter 13 of the bankruptcy code provides individuals with a five-year
repayment plan to repay debts that were not discharged in their Chapter 7 case. This
includes debts such as student loans and alimony arrears. Rosenblum says that filing for
Chapter 13 can help avoid wage garnishments for those with large amounts of student
loan debt. “Rather than making your regular student loan payment, you make your Chapter
13 plan payments, which will be lower. - Late payments: Filing for bankruptcy can be daunting, but it may be the best option to save
your home from foreclosure. Chapter 7 bankruptcy allows your mortgage holder to
foreclose on your property, so you may want to consider filing for Chapter 13 bankruptcy
instead. With Chapter 13 bankruptcy, you are typically allowed to keep the property that
you are making payments on. This can give you more time to catch up on your mortgage
payments and avoid losing your home. - Lien stripping: The elimination of junior liens, like second mortgages, can be a difficult
process. Not all courts allow for such actions, so it is important to consult with a
bankruptcy professional to see what makes sense for your particular situation.
Final Thoughts
Bankruptcy may be a good way to deal with debt, but it doesn’t get rid of all types of debt. For
example, alimony and child support aren’t discharged through the bankruptcy process, nor are
income taxes less than three years overdue. Student loans – one of Americans’ most significant
debts – are also not dischargeable.
Filing for chapter 7 bankruptcy can help get rid of some of your debt, but you may still have to
deal with some of it afterward. You may be able to file for chapter 13 bankruptcy as well, but
make sure you evaluate how it will affect your long-term finances first.
