There are different timelines depending on which chapter of bankruptcy you previously filed, also the timelines run from the filing dates, not the discharge date. Here are the rules:

-Chapter 7 to Chapter 7 = eight years (727(a)(8))

-Chapter 13 to Chapter 7 = six years (727(a)(9))

-Chapter 11 to Chapter 7 = eight years (727(a)(8))

-Chapter 7 to Chapter 13 = 4 years (1328(f)(1))

-Chapter 11 to Chapter 13 = 4 years (1328(f)(1))

-Chapter 13 to Chapter 13 = 2 years (1328(f)(2))

The timelines listed above relate to discharged first bankruptcies, this post is not about refilling a case that was dismissed.

As a side note, Deuteronomy 15:1 commands that debt be forgiven every seven years.

By Matt Berkus

Mr. Martino is known as the “Troubleshooter” and hosts a radio and T.V. show providing consumer advice and advocacy and he provides a referral list of “trusted” businesses.  He has other businesses and real estate holdings (which were apparently his financial downfall).

The 2005 bankruptcy amendments (otherwise known as BAPCPA) put in place a Means Test. The Means Test was designed to be a rote calculation to determine who could qualify for chapter 7 bankruptcy and who had to pay something back in chapter 13 or chapter 11 bankruptcy. You would think that someone with almost $90,000 in disposable income would be required to pay something back? Not so fast!

The bankruptcy code provides an exception. The means test is only applicable to individual filers who have primarily consumer debt. Most of Mr. Martino’s debt is related to real estate investments and business investments. As such, the majority of his debt is non-consumer debt; and according to bankruptcy code section 707(b)(1) the court may only dismiss a case of an individual with disposable income (that is a means to pay something back to creditors) only if that debtor’s debt is primarily consumer debt. Consumer debt is personal credit cards, mortgage on your primary residence, car loans, etc.

Entrepreneurs and business owners get a bankruptcy pass (so to speak) for taking risks to invest, open businesses, and employ people. If and when those endeavors fail, the bankruptcy code allows entrepreneurs to walk-away so they can continue to be contributing members of society.

Tom Martino filed a non-consumer chapter 7 bankruptcy; so even though he has plenty of money left over at the end of the month, the bankruptcy system will not require him to pay back even a portion of his debt. We shall see?

First, when an individual files for bankruptcy, they receive the benefit of the Automatic Stay. The Automatic Stay stops all collection activity, including foreclosure and automobile repossession, against the client. Second, secured creditors have a security interest in an item of property owned by the client; the typical examples are houses and cars. Third, a bankruptcy does not extinguish or discharge a secured creditors’ security interest; the security interest survives a bankruptcy. As such, secured creditors can still enforce their security interest if the client is in default on her loan. However, because of the Automatic Stay, secured creditors are halted from initiating or continuing with the foreclosure or repossession process. The Automatic Stay continues in effect from the date a client files bankruptcy until the case is discharge.

Typical chapter 7 bankruptcies take 4-5 months and chapter 13 bankruptcies take 3-5 years. If clients are unable to become current on their secured obligations, e.g. car payment, mortgage payment; the secured creditor can file a Motion for Relief From Stay, which, if granted, will allow the secured creditor to initiate or continue their enforcement action (foreclosure/repossession) before the bankruptcy is discharged. Nine times out of ten a MRS is not an issue because the client is surrendering the item of property. In a chapter 7, if the client goes into it behind on her car payments or mortgage payments, a MRS is issued almost automatically by the secured creditor. In short, a Motion for Relief of Stay is used so that an action that is normally halted by bankruptcy may be initiated or continued notwithstanding the bankruptcy.

Credit rebuilding after bankruptcy occurs fairly quickly and you will have access to credit (if you want it) immediately after filing bankruptcy. You will be shocked by how quickly you receive credit card offers and offers to finance a car immediately after your chapter 7 bankruptcy discharge. During that rebuilding phase, if you use credit, you will pay a higher interest rate, but once you reach that 18-24 month mark, you should be able to receive market, prime credit interest rates.

Every state, in some manner, allows you to protect your assets from being taken in bankruptcy. Bankruptcy is not about leaving you destitute for the benefit of your creditors. Bankruptcy is about rebuilding your financial life so you can thrive and be successful. In over 90% of chapter 7 bankruptcies, the debtor loses nothing (source).

There are three  types of bankruptcy cases that a consumer would be interested in:

• Chapter 7 is know as “straight” bankruptcy or “liquidation.” Debtors are provided certain cash limits on assets called “exemptions,” .  If a client is over these limits, the Debtor often has an opportunity to purchase back this property for the cash value over the exemption amount, from the Trustee.
• Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very high and they are unable to file a Chapter 13 or 7.
• Chapter 13  requires a debtor to Chapter 13 Plan to repay a portion of certain debt,  from what is lets in their monthly household budget, after expenses.  This is the chapter that allows you to strip a mortgage from your home or cram a car to it’s value, for repayment.

Most people filing bankruptcy will want to file under  Chapter 7.   Either type of case may be filed individually or by a married couple filing jointly.