How Hard Is Filing For Bankruptcy?

Whenever someone meets with a bankruptcy attorney, they'll want to have some sense of how difficult filing is likely to be. Three factors tend to influence how hard cases are.

The Recency of Previous Discharges

Of the issues that could make a case a bit tougher, this tends to be up there. In some instances, people can't file at all if a court has recently discharged their debts.

For example, someone who successfully pursued Chapter 7 liquidation can't ask the court for another discharge under Chapter 7 for at least 8 years. Similarly, they can't ask a court for a discharge of their debts under Chapter 13 for four years. Notably, the gap between cases is based on the filing dates and not the discharge dates.

There is a scenario where a person can file for Chapter 7 and 13 bankruptcies in quick succession. However, a judge doesn't have to humor it. It is a complicated process, and you'll want to tell the court your intentions before trying a double filing. If the judge doesn't like the idea, you may have to focus on just liquidation or restructuring to improve the odds of court approval.

Personal vs. Business Bankruptcy

Generally, a company's creditors have more legal rights than an individual's creditors do. This is especially the case when comparing a business bankruptcy under Chapter 11 to a personal one under Chapter 13. In Chapter 11, the creditors have the right to propose a different repayment plan for a business. However, in Chapter 13, the individual filter will be the only party submitting a plan. In both instances, the judge will have the final say.

Liquidation vs. Restructuring

Liquidating debts under Chapter 7 is often simpler as long as a petitioner clearly qualifies. Virtually all individuals qualify as long as they make less than half their state's median income. Even if they don't automatically qualify, though, folks who make above that threshold can still present arguments to a judge explaining why relief is necessary. Chapter 7 cases often wrap up within weeks or a couple of months.

Restructuring is more complex. You will have to present a repayment plan to the court. The judge and a trustee will have to review it. Likewise, the creditors can weigh in, especially if it is a business case. Even if you're working with a bankruptcy lawyer, it can take months to obtain approval. Likewise, you will have to spend at least three years making payments according to the court-approved plan.

For more information, contact a bankruptcy attorney in your area.