How to File Chapter 13 After a Chapter 7 Discharge

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You can't discharge your debts in one bankruptcy, then immediately do it all over again. Federal bankruptcy law does allow you to file Chapter 13 after you've already wiped out debts in Chapter 7. If you want to discharge more debt, it'll take time. Filing Chapters 7 and 13 in succession is sometimes called Chapter 20.

Chapter 20 Bankruptcy

In Chapter 7, the trustee overseeing your bankruptcy case sells your assets and uses the proceeds to pay your creditors. After you've paid what you can, bankruptcy wipes out your remaining debts. In Chapter 13, you pay back your creditors for three to five years using all your disposable income. You get the discharge at the end of the payment period. You can discharge debt secured by collateral but only if you give up the property. If you discharge a mortgage, for instance, you lose the house.

Warning

  • Federal law says you can't discharge fines, taxes, student loans, alimony, child support and homeowners or condo association dues. Debts due to malicious injury or fraud don't get wiped out either. If you run up big debts right before bankruptcy, the bankruptcy court may decide that's fraud and disallow a discharge for them.

By filing Chapter 7 first, you discharge unsecured debts such as credit card bills. Then all your payments under Chapter 13 go to your secured debts. That makes it easier to, for example, catch up on your mortgage if you've fallen behind. In Chapter 13, you may also be able to cram down some of your secured debts, reducing the loan amount and interest rate.

Chapter 13 Eligibility

To file Chapter 13 after filing Chapter 7, you submit the same forms as a regular Chapter 13 petitioner. You'll have to provide the court with complete details about your income, expenses, assets and debts. If you're married but not filing a joint bankruptcy petition, you have to file your spouse's financial information along with your own to provide a full picture of your household finances.

At the time of publication, you must have less than $1.149 million in secured debts and $383,175 in unsecured debts to enter Chapter 13. One advantage of Chapter 20 is that discharging debts in Chapter 7 may qualify you for Chapter 13. In the six months before you file Chapter 13, you have to go through a credit-counseling class.

Timing Chapter 13

The big obstacle to taking the Chapter 20 route is time. You can file Chapter 13 right after a Chapter 7 if you choose, but that won't get you a discharge. For that, you have to wait four years after your Chapter 7 filing date to file Chapter 13.

However there are still advantages to filing Chapter 13 and setting up a payment plan. For example, if you're at risk for defaulting on your mortgage or already defaulted, filing Chapter 13 triggers an automatic stay on foreclosure and other attempts to collect on debt. As long as you keep up payments, the bank can't foreclose until bankruptcy ends. If you catch up on back payments via the plan, you won't have to worry about foreclosure. You can also use the same period to settle back tax debts.

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