Serial Bankruptcy Filers

I am not an attorney, I am a judgment matchmaking expert (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 kind of work, I hear often "My judgment debtor can't file for bankruptcy protection" or "My judgment debtor cannot file for bankruptcy protection gain". There is very little that prevents a debtor from filing for bankruptcy protection as often as they wish. However, those that file more often than the law allows, will have eventually get their request turned down (dismissed).

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

Serial BK filers will find out that their protection from creditors will now last only thirty days, if the debtor has 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 the debtor had more than one previously dismissed BK within the preceding 12 months.

One loophole for serial BK filers, is that even if their Chapter 7 bankruptcy case was dismissed for abuse, and the debtor files again under a new chapter (such as Chapter 13), the conventional protective stay from creditors remains.

Another change, for serial bankruptcy filers is that debtors cannot file for a new BK case for six months, after a prior case was dismissed - if the dismissal was because either 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 bankruptcy filer, you could find 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 BK ninety days before to the date that their petition is filed. If a creditor takes a collection action even one day after the filing of a debtor's bankruptcy, they have violated the automatic stay mandated by federal law.

If you attempt 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 BK, you will probably be fine. If you do not return the money to the debtor after finding out about of their recent bankruptcy, you may be judged to have purposely violated federal law, and will be subject to paying massive sanctions, damages, and lawyer fees (and will also have to return the debtor's money.)

Once you receive notice of a bankruptcy, it does not matter if you have not already received the money 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 money is 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 BK protection causes most creditors give up and walk away, and never look back.

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

Not many creditors are informed enough to look on PACER on a regular basis, to monitor the status of the debtor's bankruptcy to determine 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 15 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 2 and eight 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 8 years, or 6 years if they had previously filed a Chapter 13 case. The time periods in either case is measured from the filing dates, not the final results of the previous BK 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 four years before filing again for a Chapter 13 bankruptcy. (See Federal Law 1328f1).

If the debtor filed for a Chapter 13 BK case, they must wait for 2 years before filing again for a Chapter thirteen case. (See Federal Law 1328f2).

Debtors are not allowed to have two BKs open or pending at the same time.


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Mark D. Shapiro - Judgment Broker - Free leads for Judgment Enforcers and contingency collection attorneys.
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