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Understanding a second Chapter 7 bankruptcy discharge

On Behalf of | May 5, 2020 | Chapter 7 Bankruptcy

For people in North Carolina who have already gone through the Chapter 7 bankruptcy process, the goal was to get on stronger financial ground by clearing unsecured debt through liquidation. This can apply to credit card debt, medical expenses and more. However, given the current situation in which many people are confronted with a litany of debts income – medical and otherwise – they cannot pay, considering a Chapter 7 bankruptcy filing is again on their minds.

Those who are seeking a second discharge should understand the law surrounding it and whether it is possible. If a person had filed for and received a discharge through Chapter 7 or Chapter 11 in the eight years before the second petition, the court will deny a new Chapter 7 discharge. For those who previously filed a Chapter 12 or Chapter 13 bankruptcy and received a discharge and are seeking a Chapter 7 discharge, it must have been completed more than six years before.

There are exceptions. If all “allowed unsecured” claims had been paid or the debtor paid 70% of unsecured claims in a good faith plan and there was a “best effort” made to make the payments, then there can be a second discharge. For those thinking about a Chapter 13 plan after receiving a previous Chapter 7 discharge, it will be denied if the case was filed within four years of the new case or there was a Chapter 13 in the previous two years.

The goal of a Chapter 7 is to clear unsecured debt and keep certain types of property like an older motor vehicle that is exempt from liquidation. Those who have filed successfully in the past will know the process and hope they can again improve their financial outlook with a bankruptcy. This is common given the amount of job loss, accrued medical debt and other issues that are part of current events. However, there are rules that may prevent a person from again getting a discharge. Understanding the process and considering other debt relief options may require legal advice. A law firm that is experienced in Chapter 7, Chapter 13 and second-time bankruptcy can provide advice on how to move forward.


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