Combatting Serial Bankruptcy Filers

I am not an attorney, I am a judgment matchmaking specialist (Judgment Broker). This article is just my opinion, based on the laws I have studied, and what I have learned. Nothing in any of my articles can ever be considered legal advice.

In my line of work, I often hear "My judgment debtor cannot go bankrupt" or "My judgment debtor can't go bankrupt gain". There is very little that prevents a debtor from filing for BK protection as often as they want. However, those that file more often than the law allows, will have eventually have their request turned down (dismissed).

Some debtors file for bankruptcy protection so often, they annoy the courts, and have been considered "serial BK filers". Here is a summary of some of the recent changes to laws to help thwart serialBK filers:

Serial bankruptcy filers will find out that their protection from creditors now lasts only thirty days, if the debtor had previously filed for a (dismissed) bankruptcy within the preceding twelve months. Even better, there will be no bankruptcy allowed (and no protection at all from creditors) if they had more than 1 previously dismissed BK within the prior 12 months.

One loophole for serial bankruptcy filers, is that even if their Chapter seven bankruptcy case was dismissed for abuse, and the debtor files again under a new chapter (for instance Chapter 13), the conventional protective stay from creditors remains.

Another change, for serial BK filers is that debtors cannot file for a new bankruptcy case for six months, after a previous case was dismissed - if the dismissal was either because they purposely failed to comply with an order of the court, or if they agreed to a creditor's request for relief from their automatic BK stay.

If your debtor is a frequent BK filer, you could locate the case numbers of their recent filings for BK (in all districts) and look for dismissals or terminations, and be prepared to present this information, should you choose to appear in court.

Bankruptcy is serious. The petitioner is legally presumed to be bankrupt ninety days before to the date that their petition is filed. If a creditor takes a collection action even 1 day after the filing of a debtor's BK, they have violated the automatic stay mandated by federal law.

If you try to collect from the debtor at any time between the date they filed for BK protection, and when their case is either dismissed or terminated, you have violated the automatic stay. If you do this accidentally, return the funds to the debtor immediately.

If the violation was an accident, and you return the money to the debtor as soon as you learn of their bankruptcy, you will probably be ok. If you do not return the money to the debtor after learning of their recent BK, you may be judged to have willfully violated federal law, and will be subject to paying massive sanctions, damages, and attorney fees (and will also have to return the debtor's money.)

Once you receive notice of a BK, it does not matter if you have not already received the funds directly. For example, if you had the sheriff levy the debtor's bank account one day after they filed for bankruptcy, it is your duty to take any actions required to make sure the funds are returned to the debtor. In a levy situation, you would inform the sheriff in writing of the BK, and ask them to return the money to the debtor.

Because of BK hassles, costs, and risks of violating federal law, a debtor merely starting the process of filing for bankruptcy protection causes most creditors give up and walk away, and never look back.

Debtors know that many creditors will walk away when they file for bankruptcy. Possible violation of a debtor's BK is something to be mindful of, however a smart creditor will monitor the debtor's ongoing BK status. Unless the debtor is really very poor. In that case, why bother trying to collect at all?

Few creditors are informed enough to check on PACER on a regular basis, to monitor the status of the debtor's bankruptcy to see if it succeeds (their debts are discharged), or is dismissed or terminated (their bankruptcy attempt failed).

To bring a serial BK filer to the court's attention, one can use PACER to monitor the financial paperwork, which the debtor is required to file with the court within fifteen days of filing their petition.

One can appear at the 341 meeting of creditors. The debtor's paperwork may contain some helpful information, and maybe a few inconsistencies, which you can optionally explore during your 5-minute appearance at the 341 meeting of creditors.

The time limits for a debtor filing for bankruptcy again ranges between two and 8 years.

A debtor cannot get a discharge in a Chapter 7 BK case if the debtor previously got a Chapter seven discharge within the past eight years, or six years if they had previously filed a Chapter thirteen case. The time periods in either case is measured from the filing dates, not the final results of the previous bankruptcy attempt. (See Federal Laws 11 USC 348a, and 11 USC 727a).

If the debtor had filed for a Chapter 7 BK case, they must wait for 4 years before filing again for a Chapter 13 bankruptcy. (See Federal Law 1328f1).

If the debtor filed for a Chapter 13 bankruptcy case, they need to wait for two years before filing again for a Chapter thirteen case. (See Federal Law 1328f2).

Debtors are not allowed to have 2 bankruptcies open or pending at the same time.