Those Who Filed Chapter 7 Bankruptcy in 2005 May File Again in 2013

New year 2013In April 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act, or “BAPCPA” as we bankruptcy attorneys call it. On the day BAPCPA passed, I was interviewed by our San Jose CBS affiliate, KPIX, about the sweeping changes to bankruptcy law contained in BAPCPA. Among consumer bankruptcy lawyers everywhere, there was a good deal of handwringing over what the new bankruptcy law would mean for the typical honest debtor needing a fresh start from Chapter 7 bankruptcy.

Sure, BAPCPA introduced the Means Test, thereby supplanting the insight and good judgment of local bankruptcy judges with standardized living expenses gleaned from the IRS, as to whether a Chapter 7 debtor could afford to make payments on her debts. And, yes, it required debtors to reaffirm their car loans, thus waiving part of their discharge. Perhaps most annoyingly, BAPCPA introduced the fairly inane requirement that all individuals filing personal bankruptcy complete credit counseling and debtor “education” courses in order to receive a discharge. But in the end, the sky didn’t fall, and once we bankruptcy attorneys all became familiar with the new requirements, and once the media hype died down, everyone realized that the powerful debt relief afforded by Chapter 7 bankruptcy remained the best option for many families drowning in debt.

Why am I rehashing this eight-year-old news now in 2013? Because one of the consequences of BAPCPA’s passage in 2005 was that Chapter 7 bankruptcy filings increased enormously between the passage of the act in April and the day it went into effect in October 2005. The hype surrounding BAPCPA led the public at large to believe that no one would ever qualify for bankruptcy relief again, or that it would become oppressively difficult to file. So it seemed nearly everyone with a bit too much credit card debt at the time filed Chapter 7 in the months leading up to October 15, 2005.

Of course, those folks who filed Chapter 7 in 2005 had no idea that just three years later, we would have a financial meltdown and that the Great Recession would thereafter scourge our economy for the ensuing four years. 2005 bankruptcy filers did not know then that in a few short years massive unemployment and a foreclosure crisis would put them in greater peril than they had been in 2005 with credit card debt.

Sadly, those who did receive a bankruptcy discharge in 2005 have been unable to seek bankruptcy relief under Chapter 7 again because BAPCPA also lengthened the number of years to eight that one must wait to obtain a successive Chapter 7 discharge. Sure, one may have filed Chapter 13 in as few as four years after that 2005 case was filed, but if you are unemployed with no source of income other than unemployment, it’s awfully difficult to show income sufficient for a feasible Chapter 13 plan. I’ve fielded dozens of calls from individuals who filed Chapter 7 back then, but who, through no fault of their own have lost jobs, incurred astronomical medical bills, lost their homes, and have been sued in the intervening years. Unfortunately, I’ve had to tell them, they could not file Chapter 7 again until 2013. If they couldn’t feasibly make Chapter 13 payments, they were just going to have to hang tough until then.

The good news for those who now have judgments against them for medical bills, credit card debt, car repossessions, and equity lines from foreclosed homes, but who couldn’t file Chapter 7 because they filed in 2005, this year you may file again. If you’re eligible for Chapter 7 because your necessary living expenses exceed your monthly income, and if you filed back in 2005, then count forward from the filing date of your last petition. You can file another Chapter 7 petition eight years from that date.

We’re consumer bankruptcy attorneys in San Jose, California. If you live in the Bay Area and have more debt than you can handle, give us a call for a free consultation.

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