Second Bankruptcy Filing Does Not Provide As Many Protections For Debtors as the First

When a party files for bankruptcy for the first time, either under Chapter 7 or Chapter 13 of the Bankruptcy Code, they are generally entitled to a legal phenomenon called the “automatic stay.” The stay operates to protect the debtor against debt collection attempts, other creditor activities, and generally any proceedings that relate to debts held by the debtor at the time of the bankruptcy filing. In an initial bankruptcy filing, the stay continues to operate during the whole time of the bankruptcy proceedings, which in some cases can take years. In this way the automatic stay operates as a shield for the debtor.

However, if a debtor is filing bankruptcy for the second time, circumstances are different. Specifically, if it has been less than a year since the debtor has last filed bankruptcy or been in bankruptcy court, the stay does not last as long. In a subsequent proceeding, the stay only lasts for thirty days. As a result, the debtor in a second bankruptcy proceeding does not have as much of a shield as he did in the first bankruptcy proceeding.

One reason for this change is that courts assume if a debtor files a second bankruptcy proceeding within a year of the first, the proceeding is not made in good faith. The legal effect of this assumption is that the debtor must prove that his new filing is in good faith. In a first bankruptcy filing, the presumption is reversed; that is, the debtor is entitled to the shield of the automatic stay unless the government or his creditors can show that his filing is in bad faith.

If the debtor cannot show that he is acting in good faith, his creditors can initiate proceedings such as foreclosure, wage garnishment, or reporting him to credit bureaus for non-payment. The attorneys at Parkman and White, LLC are very familiar with the complicated law governing bankruptcies and the automatic stay specifically. If you or someone you know are considering filing for bankruptcy or have already filed for bankruptcy but have questions regarding your rights under the Bankruptcy Code, please contact the firm at (855) 569-1678.