At Howard Law, P.C., our Perris personal bankruptcy lawyers advise clients to take care of everything they can with their first bankruptcy, because a second bankruptcy is not as easy. While there's no law forbidding you from filing a second bankruptcy directly after the first is discharged, there are laws requiring debtors to wait a certain number of years, depending on the circumstances, between bankruptcy discharges. And not being eligible for a discharge makes a big difference in whether the bankruptcy is worthwhile and how your finances might suffer. In In re Finney, bankruptcy filer Charlene Charm Finney filed for Chapter 13 bankruptcy within four years of a previous Chapter 13 filing that had been converted to Chapter 7 before discharge. The Bankruptcy Appellate Panel ultimately agreed with the bankruptcy court that a four-year discharge bar applied.
Finney, a Nevada resident, filed for Chapter 13 bankruptcy in July of 2008. Eight months later, she voluntarily converted the case to a Chapter 7 bankruptcy and received a Chapter 7 discharge in July of 2009. In March of 2011, Finney filed a second Chapter 13 case. On her bankruptcy filing forms, she indicated that she was eligible for a discharge. However, her Chapter 13 trustee filed an objection in court, contending that she was not eligible because she had filed for Chapter 13 bankruptcy within four years. Bankruptcy law requires debtors to wait at least two years between two Chapter 13 filings if they want to receive a discharge. However, a debtor who files for Chapter 7 bankruptcy and receives a discharge may receive a Chapter 13 discharge again if he or she waits at least four years to file. The bankruptcy court ruled that Finney was eligible for a discharge and the trustee appealed.
The Ninth Circuit BAP reversed, finding that the trustee's standard was correct. The statute expressly addresses the effects of converting one type of bankruptcy to another: a converted case constitutes an order for relief under the chapter converted to, but does not change "the date of the filing of the petition, the commencement of the case, or the order for relief." Thus, the trustee argued, the first case is deemed, by law, to have been filed under Chapter 7, triggering the longer four-year waiting period between discharges. The panel noted that most bankruptcy courts to consider the issue have sided with the trustee. It therefore rejected the case cited by Finney, which cited bankruptcy code section 1328(f), which refers to "a discharge in a case filed under" Chapters 7 or 13. A literal interpretation of "filed under" is contrary to the intent of Congress to create more stringent discharge rules, the panel said, relying on a BAPCPA-era Congressional report. Thus, it disallowed the discharge in the current case.
The panel noted in a footnote that Finney could easily avoid this issue by filing again, since her four-year deadline passed while the appeal was pending. But Vincent Howard and our Lake Forest consumer bankruptcy attorneys would be interested to see an appeal of this case, since the panel rejected a literal reading of the "filed under" language in the law. The law is arguably contradictory, since the "filed under" language would be directly opposed to the section requiring a Chapter 7 conversion to be treated as if it had always been Chapter 7. And reliance on a Congressional report is not much guidance, particularly since BAPCPA is not well liked by bankruptcy lawyers and judges. When there's a tricky interpretation issue, it's not uncommon for appeals courts to disagree. Vincent Howard and our Chino individual bankruptcy lawyers would be interested to see if they do.
If you're considering bankruptcy as a way to escape debt you can no longer manage on your own, you should talk to Vincent Howard and the team at Howard Law. For a consultation, call us today at 1-800-872-5925 or send us a message through our website.