Chapter 13 bankruptcy can be an excellent tool for dealing with debt. If you read my last posting you know that those living in Indiana may be able to remove a second mortgage, “refinance” a vehicle, or repay income taxes over time without additional late fees and penalties through Chapter 13 bankruptcy. However, it takes discipline as well as a little luck to make it through the 3 to 5 year repayment period required by a Chapter 13 bankruptcy. Many people find that things happen in life which prevent them from making the Chapter 13 trustee payment. And….eventually, if the Chapter 13 trustee does not receive a payment then the case will be dismissed. When a Chapter 13 is dismissed it means that the debtors are no longer protected from creditors and are basically right back where they started prior to filing bankruptcy with creditors calling, lawsuits, garnishments, frozen bank accounts and potentially even a sheriff sale.
However, there is a bright side for those people who would like to remain in the protection of bankruptcy. In most cases it is possible to re-file another Chapter 13 bankruptcy petition after a previous case was dismissed. There is no specific period of time one must wait after the dismissal of a Chapter 13 prior to refiling. However, if there has been one case dismissed in the prior year then then the automatic stay, that goes into effect when one files bankruptcy goes away after thirty (30) days. The automatic stay protects a debtor by preventing creditors from attempting to collect on a debt or judgment. Therefore, if the automatic stay goes away thirty (30) days after the filing of the Chapter 13 bankruptcy that debtor could be left without any protection 31 days into the bankruptcy. Without the automatic stay much of the benefit of filing for bankruptcy protection is lost. However, it is possible to file a Motion to Extend the Automatic Stay with the bankruptcy court. And, so long as the debtor(s) had a good reason that their previous Chapter 13 bankruptcy was dismissed the judge, in my experience, usually grants the motion.
It is much less likely that the same debtors would have had two Chapter 13 bankruptcies dismissed in one year. However, it has certainly happened. If a debtor has had 2 Chapter 13 bankruptcies dismissed within one year prior to the third Chapter 13 filing then there is no automatic stay. This could be very important in the event that the third bankruptcy petition was filed in an effort to stop a sheriff sale. That means that the third filing of a Chapter 13 bankruptcy would not stop a sheriff sale. The debtors, typically through their counsel, can file a Motion to Put the Automatic Stay into Place when they are filing their third Chapter 13 bankruptcy petition in one year. This motion must be filed within thirty (30) days after that third Chapter 13 petition is filed. I have never had to file a motion asking for the automatic stay on a third Chapter 13 in one year, but I believe whether the judge would grant this motion would be highly determined by the facts of the debtor’s situation.
Of course, it is always better to only need to file Chapter 13 one time. Filing additional Chapter 13 bankruptcies within a short period of time will only lead to additional stress, financial strain due to additional attorney fees as well as additional filing fees.
If you are considering bankruptcy and live in Indianapolis, Zionsville, Carmel, Noblesville, Fishers, Tipton or Westfield and would like to meet with me at Halcomb Singler for a free initial case evaluation please feel free to contact me at (317) 575-8222 or click here and we will contact you to schedule your free case review.