New to Bankruptcy #2
What would you do in this bankruptcy situation?
A potential client comes to you and says she wants to file bankruptcy.
You ask, “Why do you want to file bankruptcy?”
She says “I am a single mother. I lost my job. I cannot afford to pay my bills and I cannot take it anymore. I have enough money for food and rent, but cannot pay the credit cards.”
What would be your next question?
Bankruptcy law is a powerful tool. It stops collection efforts from creditors such as a foreclosure on a house, a repossession of a car, a garnishment of wages, and lawsuits from going forward. Bankruptcy relief, however only applies if someone is eligible to file bankruptcy.
Your next question to the potential client is:
Have you ever filed bankruptcy before?
If she says she has not filed bankruptcy before then she might be a candidate to file a bankruptcy case now. You will know when you look further into her situation.
What if she says she has filed bankruptcy before?
You will want to know when she filed a previous case.
The Bankruptcy Code is specific as to when a person may file a second bankruptcy case after receiving a discharge in the first case.
The bankruptcy code provides that a person may file a chapter 7 bankruptcy case eight years after the filing of the previous case.
“11 U.S.C. 727(a)The court shall grant the debtor a discharge, unless... (8)the debtor has been granted a discharge under this section, under section 1141 of this title, or under section 14, 371, or 476 of the Bankruptcy Act, in a case commenced within 8 years before the date of the filing of the petition....”
In our example, when she says she filed a bankruptcy case before, then the next question would be what type of bankruptcy did you file and when did you file the case.
What type of bankruptcy did you file?
The most common type bankruptcy case is a chapter 7 case. This is a liquidation case and the debtor ( person filing the case) usually does not have to pay back most debts. The Chapter 13 bankruptcy, not as common, is the case where the filing person pays back some or all of the debts over three to five years. The Chapter 11 rarely involves an individual debtor.
Most people will say they filed a chapter 7 bankruptcy case.
Then the next question to ask is when was the case filed with the court?
The Bankruptcy Code says at 11 U.S.C Section 727(a)(8) states that if the person wants to gain a discharge of her present eligible debts, she must wait “eight years” from the filing of the previous case to file another chapter 7 case.
If she filed her previous case on January 1, 2013, then she must wait until January 3 or 4, 2021 to file the next chapter 7 case. Eight full years have to elapse in order for her to file another chapter 7 case.
Why not file the second case on January 1, 2021, which would seem to be eight (8) years?
Every four years there is a leap year, and another day is add to that calendar year. The waiting a few extra days accounts for the two leap year days added within the eight year span. This tip will gain the client a few days of breathing room with 11 U.S.C. 727(a)(8) in case the court clerk is counting the days!
Another question is when do you count the start of the eight (8) years?
The Bankruptcy Code at section 727(a)(8) says “a case commenced within 8 years before the date of the filing of the petition.” The date to start counting the eight years is the filing date of the first case. If she filed on February 15, 2014 and received a discharge on July 1, 2014 in a chapter 7 case. The date to start counting is the filing date of February 15, 2014.
February 15, 2014 plus eight years and a few days equals February 18, 2022. This is the safe date for her filing her next chapter 7 case.
If you do not know the date of the previous case filing, you can go to the PACER database at the bankruptcy court and find out when the previous case was filed. Or ask the client for the paperwork from the previous filing.
If she accidentally filed her second chapter 7 case before the running of the eight years, then the court clerk would dismiss the second filed case as she is not
eligible to file the new case. The time, effort and money spent on the second case would be wasted and the client would have to wait to file the case. This is why it is important to ask if she filed a bankruptcy case before. While she may be economically deserving of a chapter 7 discharge now, she may not be factually eligible.
Practice Pointer: Ask early in the intake conversation whether a person has filed for chapter 7 bankruptcy before and when. This will avoid you spending time and effort on a person that you cannot help until the statutory time runs for eligibility.
If she has filed a previous case and the eight years plus has run, then note the date of the previous filing of the case and the previous case number as the bankruptcy court and the bankruptcy trustee will ask about these dates. In addition, the first case filing information will be included in the bankruptcy petition.
Bankruptcy law is a powerful tool. Bankruptcy relief, however only applies if someone is eligible to file bankruptcy. Your job as a bankruptcy lawyer is to counsel a client on the law and the benefits and burdens. But before you can get there, find out if the person is eligible.
A quick question at the beginning of the intake will tell you and your potential client whether it is advantageous to continue talking or to explore another route.