discharge Archives - Northern California Bankruptcy Lawyer

When Can I File Bankruptcy Again

Remember the old high school cheer: two, four, six, eight, who do we appreciate?

Turns out, that’s not just a cheer, it’s shorthand for the rule on when you can file bankruptcy again.

And it points out that when you can file again depends on what kind of bankruptcy you filed last time.

Here’s how it works.

If prior case was Chapter 13

You are eligible to file another Chapter 13 case TWO years from filing an earlier Chapter 13. [ This had to be a drafting error since nearly all Chapter 13’s run at least three years. But I’ll take it.]

If you now want to file Chapter 7, you must wait SIX years.

If prior case was Chapter 7

You can file a Chapter 13 case FOUR years after an earlier Chapter 7.

But if you have your eye on Chapter 7, the wait is a whopping EIGHT years.

Put another way

Starting with the kind of case you filed before, as we did above, is one way to look at eligibility.

But here’s how it looks if you know what kind of case suits your current situation best.

To file Chapter 13, your prior case must be at least TWO years ago
To file Chapter 13 when the earlier case was Chapter 7, the wait is FOUR years
To file Chapter 7 with an old Chapter 13 filing, the wait is SIX years
To file Chapter 7 following an earlier Chapter 7, EIGHT years must elapse.

Intervals between discharges

We’ve talked about the time between cases, and really glossed over the real measurement.

The statutory intervals really measure the time between cases in which a discharge is available. The two, four, six, eight rule limits when you can file a new case in which you can get a discharge of your dischargeable debts.

When you don’t NEED a discharge

There are time when the discharge is less important than the automatic stay. Most frequently, these are cases of “Chapter 20“, a Chapter 7 followed immediately by a Chapter 13.

The debtor doesn’t get a discharge in the 13 following the 7, but they do get a stay of collection action and a court-enforced repayment plan.

Chapter 20 works well when the debts that survived the Chapter 7 aren’t dischargeable anyway. These are times when the debtor really just needs time and space to pay off the nondischargeable debt that is left from the Chapter 7.

The Bankruptcy Code limits the frequency of getting a discharge, not the filing and completion of the bankruptcy case.

Counting between bankruptcy cases

It shouldn’t be complicated to count to eight, but it CAN be confusing. Where do you start counting?

Count from the filing of the first case to the filing of the second case.

And count only cases in which you got a discharge. If your earlier case was dismissed or concluded without a discharge, it doesn’t count.

So, let’s have a cheer for bankruptcy relief.

When bankruptcy’s automatic stay doesn’t apply

Skip Filing Your Tax Return And The Tax Lives Forever

By Cathy Moran

It’s tax season and tax myths are everywhere. Know what the most dangerous one is?

If you can’t pay the tax on the return, you’ll escape collection action if you keep a low profile by not filing the return.

I hear it repeatedly, each year, year after year. And it’s wrong, over and over.

Four counts of wrong

First, I’ve seen no evidence that the IRS leaps immediately to chase taxpayers whose filed return shows an unpaid liability. In fact there’s a right to an installment agreement if your unpaid tax is $5,000 or less.

Second, failing to file the return on time triggers a tax penalty separate from the penalty for not paying on time. There are two penalties in play here: a penalty for not filing and a different penalty for not paying.

Third, duck the requirement to file, and somehow you’ve given yourself permission to keep putting it off. And of course, now that you are late, you have penalties added to the liability and the interest clock is ticking.

But most importantly to a bankruptcy lawyer is that you cannot ever discharge the tax debt in bankruptcy if the return is not filed.

Discharging tax in bankruptcy

Bankruptcy law sorts tax debts into three piles:

taxes secured by a lien
taxes that survive a bankruptcy
taxes dischargeable without payment

If you’ve got tax troubles, you obviously want your obligations to fall in that third pile, the dischargeable taxes. Care to guess what the factor that determines dischargeability? The length of time the return has been on file.

The rule, simplified a bit, is: taxes are dischargeable in bankruptcy if they relate to a tax year whose return was due more than three years before bankruptcy; for which the return, if not filed on time, has been on file for two years; and the taxes for that year were assessed more than 240 days before filing.

So, you can’t begin to consider wiping out tax debt if you don’t file the return and that return needs a certain degree of aging before discharge is possible.

Bankruptcy is not the first choice of ways to resolve tax troubles, but bankruptcy can eliminate tax debt if it comes to that.

But not if you follow the myth that you don’t file the return until you can pay the tax.

Image courtesy of wikimedia.org

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Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area