One of the more punitive sanctions foisted upon debtors under the new bankruptcy law, is the restriction upon discharge in subsequently filed cases. Under the old law, a debtor was only entitled to a Ch. 7 bankruptcy discharge, once every 6 years. There were no other ‘bright line’ restrictions regarding repeat filings between other chapters.

Now, under the new Bankruptcy Code, 3 new discharge restrictions, and 1 modified restriction, exist. The most common rule §727(a)(8) applies when a debtor files a Ch. 7 and then files another Ch. 7 case. That old 6 year time frame has now been extended to 8 years. The 6 year rule, is new, and now applies where a debtor has obtained a discharge in a Ch. 13 and then files a subsequent Ch. 7 case. §727(a)(9) states that the debtor is not eligible for a discharge in the subsequent Ch. 7 case, unless 6 years have passed. The next new rule is found in §1328(f)(1), and is the 4 year rule, barring a discharge in a subsequent Ch. 13, after a Ch. 7 discharge has been obtained.

Finally, the 2 year rule is found §1328(f)(2) , and that rule prescribes no subsequent discharge in a Ch. 13 case, where a prior Ch. 13 discharge has entered, unless 2 years have  passed. So, how does anyone remember these rules, and what do they mean, in practice? I remember them in this way: Start  with the 8 year rule, as that’s the easiest, 7 to 7 is the 8 year rule. Next, recall the 2 year rule, as that’s easy to remember, as well, 13 to 13. This leaves the 6 and 4 year rules. I remember the 6 year rule by applying math, 13 minus 7 = 6, therefore the 13 to 7 restriction is the 6 year rule. Finally, the only one left is the 4 year rule, and that applies on 7 to 13 re-filings.

In practice then, what do these rules mean? Well, for starters, it’s clear that they are measured from filing date of the prior case to the filing date of the subsequent case. It’s also fairly well settled that the rules only prevent a subsequent discharge from entering, they do not prevent a subsequent filing of a case. This latter application can be important in a ‘Ch. 20′ filing, where a debtor files and obtains a discharge of debt in a Ch. 7 case, but then files a later Ch. 13 case (within 4 years) and then cannot obtain a subsequent discharge. Oftentimes, the debtor in the subsequent Ch. 13 case is trying to repay non-dischargeable debt, such as taxes, child support, or to repay arrears on a home or restructure a car loan. In these instances, a subsequent discharge is not needed, so the restriction has no ‘real’ impact. Another example of minimal impact is the 2 year, Ch. 13 to Ch. 13 restriction. In practice, most Ch. 13 cases that complete and go to discharge, are in existence for 3 to 5 years. While it is conceivable that a Ch. 13 case could complete and discharge in 1 or 2 years, this is not normal, and thus, the 2 year rule is of little impact, in these circumstances.

As always, any new debtor, or any repeat debtor, should contact a bankruptcy attorney to go over these and all the other myriad issues presented by the ‘new’ law. This is the best advice to maximize one’s benefits of the Bankruptcy ‘fresh start’.  

John C. Colwell, Attorney, Debt Relief Legal Clinic, San Diego, CA

www.debtclinic.com

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