When to File Bankruptcy: 6 Timing Rules That Decide Whether You Still Can

The calendar that decides whether a person can still file bankruptcy was set by the last case, not by the current crisis. Most of the timing rules in the Code look backward from the filing date to an earlier petition, an earlier discharge, or an earlier payment, and they count in years, in days, or in the gap between two docket entries.

The six rules below answer the question of when to file bankruptcy from that direction. Nearly all of them govern individuals, including owners filing over personal guaranties; the note at the end of the fourth rule explains what that means for a company. None of them should be applied to a real history without the old docket and counsel reading it.

1. Eight Years Between Chapter 7 Discharges, Measured From Filing to Filing

Under section 727(a)(8), the court will not grant a chapter 7 discharge to a debtor who received a discharge under chapter 7, or under chapter 11 through section 1141, in a case commenced within eight years before the new petition. Congress lengthened the period from six years to eight in 2005.

The rule is precise about two things owners often get wrong. It runs from the filing date of the earlier case to the filing date of the new one, not from the date of the earlier discharge. And it bars the discharge, not the filing. A person may file a chapter 7 petition in year five; what the person cannot obtain in that case is the one thing chapter 7 exists to give.

Section 727(a)(9) adds a related bar for a debtor whose earlier discharge came from chapter 12 or 13 in a case commenced within six years, unless the earlier plan paid all allowed unsecured claims in full, or paid 70 percent of them under a plan proposed in good faith that was the debtor's best effort. The exceptions are real, though they tend to belong to people who were paying their creditors in full the first time.

2. Chapter 13 Counts Four Years, or Two

A different clock applies when the new case is a chapter 13. Section 1328(f) denies a chapter 13 discharge to a debtor who received a discharge in a chapter 7, 11, or 12 case filed during the four years before the order for relief in the new case, or in a chapter 13 case filed during the two years before it.

The effect is that a person who cannot yet obtain a second chapter 7 discharge may still be able to file chapter 13 and propose a plan, but may not receive a chapter 13 discharge if the earlier case falls within these windows. A case with no discharge at the end of it can still serve a purpose (the automatic stay, which begins with the petition, and a confirmed plan that directs projected disposable income to creditors over its term, both of which operate whether or not a discharge waits at the end, and both of which counsel will weigh against three to five years spent under a standing trustee's supervision). Whether that purpose is worth the plan is a judgment for counsel.

3. A Dismissal Can Close the Door for 180 Days

Section 109(g) bars an individual from being a debtor at all for 180 days after a case that was dismissed "for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case," or after the debtor "requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay."

This rule, unlike the discharge bars, stops the filing itself. A petition filed inside the 180 days is exposed to dismissal whatever its merits, which makes the manner of an earlier case's ending (willful default, or a voluntary dismissal that came after a creditor moved for stay relief) more important than the fact that it ended.

4. A Second Filing Within a Year Buys a Shorter Stay

The automatic stay is the part of bankruptcy most people want first, and section 362(c) rations it for individuals who filed recently. If one earlier case under chapter 7, 11, or 13 was pending within the preceding year and was dismissed, the stay as to debts, property securing them, and leases ends on the 30th day after the new filing, unless the court extends it after a hearing completed within those 30 days and on a showing of good faith. The statute presumes bad faith in listed situations, and the debtor may rebut that presumption only by clear and convincing evidence.

If two or more earlier cases were pending within the year and dismissed, the stay does not arise at all when the new case is filed. A party may ask within 30 days for the court to impose one, and it runs only from the court's order.

Sections 109(g) and 362(c)(3) and (4) apply to individuals. A company's repeat filing is examined under other standards, which counsel will identify from the earlier case.

5. The Lookback Clock Runs Toward the Creditors

A trustee may recover certain payments made to creditors within 90 days before the petition, or within a year for insiders, and transfers made within two years before it for less than reasonably equivalent value or with intent to defraud. Every week between a payment and the petition moves that payment closer to the edge of the window. Waiting, in this narrow sense, benefits the creditor who was paid, and the choice of date is therefore not a neutral act. Counsel weighs it; nobody should file, or delay filing, for this reason alone.

6. Some Taxes Grow Dischargeable With Time

For an individual, section 523(a)(1) excepts from discharge taxes that carry priority under section 507(a)(8). Among income taxes, that priority reaches taxes for years whose returns were last due, with extensions, within three years before the petition, and taxes assessed within 240 days before it, with tolling for offers in compromise and prior bankruptcy stays. It also excepts taxes for which a required return was never filed, or was filed late and within two years before the petition, and taxes where the debtor filed a fraudulent return or tried to evade.

The arithmetic therefore changes month by month, and a filing made in the wrong month can leave a tax in place that a later filing would have reached. Withheld trust fund taxes, which a responsible person owes "in whatever capacity," do not age out this way. No one should compute these dates from an article; the transcripts decide.

When Timing Leaves Room for Negotiation

A person who cannot yet file, or cannot yet receive a discharge, often has a company whose debts still need an answer. Delancey Street negotiates merchant cash advance and other business balances outside court as a settlement firm, not a law firm, and it does not advise anyone on when to file. Its first look at the contracts and bank activity is free and confidential, and legal questions go to independently licensed counsel. An owner who is barred from a discharge and already facing judgment enforcement needs a bankruptcy lawyer to read the old docket first.

The earlier case never quite closes. It stays on the docket as a date, and every later decision is measured from it.