Personal Bankruptcy Questions

I received a question recently which made me a little worried.  The person was asking whether it was possible to declare bankruptcy two or more times.  We’ll get to the specific answer to this question, but first I want to ask you a simple question.  What’s wrong with asking if you can declare bankruptcy two or more times?

Well, I think it reveals a flaw in a person’s thinking.  You see, bankruptcy is a real option for many people who don’t see any other way to cure their debt problems.  It should go without saying that you should think this decision over carefully, and you should also discuss all of your options thoroughly with a good lawyer.  Nevertheless, declaring personal bankruptcy remains a perfectly legal way to resolve your problems with excessive debt.

The thing is that this should be taken as a second chance financially, and you should use this chance to rebuild your financial life step by step.  For most people, excessive spending and lack of discipline have led to their financial problems (especially large amounts of unsecured debts like credit card debt).  It’s true that sometimes unexpected events like medical emergencies can also cause people to go into debt, but I think that by and large our spending habits are simply out of control.

So there is an assumption that after you declare personal bankruptcy you’re going to examine your spending habits and change them as needed.  As a matter of fact, the new bankruptcy law requires financial counseling classes in order to qualify for chapter seven bankruptcy.  The court does not want you to simply wipe out your debts one day, and then return to your previous habits and eventually end up in bankruptcy court again.

The situation is unfortunately more common than you might think.  The bottom line is that you must use this opportunity to rebuild financially and not simply return to your old habits.

But what about the original question?  Can you declare bankruptcy more than once?  Well, the basic rule is that you cannot get your debts wiped out a second time within eight years.  So if you declare chapter seven bankruptcy today (and your case is successful), then you cannot file chapter seven again within eight years.  This rule does not apply, by the way, if your original case was not successful or if you originally filed chapter 13 and paid off most of your debt.