Many people wonder what the constraints are to re-filing a Chapter 7 bankruptcy after receiving a dismissal from a current Chapter 7 filing. There are a number of reasons for a dismissal occurring and none of the reasons play well with the bankruptcy courts or the bankruptcy appointed trustee. These reasons are shown later on in this article.
By law, that being the Federal Bankruptcy Law (FBL), there is no actual waiting time limit before being allowed to re-file a chapter 7 bankruptcy. However, there are repercussions and limitations from being dismissed previously. One of the biggest limitations of re-filing for Chapter 7 within one year of a dismissal is that the debtor now experiences the reduced existence of the automatic stay in a re-filing of a bankruptcy after a dismissal. The Bankruptcy Law Network Glossary of Important Bankruptcy Terms defines an “Automatic Stay” as being an order by the Bankruptcy Court that immediately stays, or stops, all collection actions against the debtor. The automatic stay translates into the immediate stopping of lawsuits, garnishments, letters, foreclosures, collection calls and attachments, and even regular monthly bills. Again, under the 2005 amendments to the Bankruptcy Code or FBL, the automatic stay duration of effectiveness is limited if a debtor re-files a Chapter 7 case within one year of the dismissal of his or her previous bankruptcy. The automatic stay now terminates for this debtor thirty days after the bankruptcy petition is filed. The only way to prevent this early termination is for the debtor to show that the new bankruptcy was filed in good faith. However, many experts noted that “good faith” is not defined by the amendments or in the FBL. Yet, standards of good faith are set forth elsewhere, defining as to when someone is in good faith or bad faith. The Uniform Commercial Code (UCC) now has several provisions using the concept of “good faith.” But in the UCC what exactly does “good faith” mean? The UCC originally defined “good faith” as “honesty in fact in the conduct or transaction concerned.” Refer to UCC § 1-201(19) (2006). But that definition was later reworked. The current UCC definition of good faith means “honesty in fact and the observance of reasonable commercial standards of fair dealing.” Refer to UCC § 1-201(20) (2011).
An odd trend arose from several people who had experienced being dismissed and re-filing. Their similar statements were around how a person avoids having his or her case dismissed. The easiest way, they said, is to use the services of an experienced consumer bankruptcy attorney. After about the third or fourth similar reference, it became clear that one of the more often reason for a dismissal was due to the debtor not having an experienced attorney and messing up on the protocols and expectations of the bankruptcy court and or trustee. That is a rather sad realization. But in several other statements by people, and in the FBL itself, there are about five reasons for a dismissal:
- Failing to complete required credit counseling
- Lying on the official bankruptcy forms, or hiding your property so that it can’t be sold, or liquidated
- Failure to file the correct forms or pay the filing fee
- Failure to appear at the meeting of creditors
- Failure to make payments for your Chapter 13 repayment plan