Originally published: November 29, 2015 -- Updated: August 10, 2021

UPDATE: In addition to understanding how the dismissal of a bankruptcy case may affect their ability to refile for bankruptcy and address their debts, a person will also need to understand how foreclosure proceedings will be affected. An initial bankruptcy filing will place an automatic stay on any collection actions, meaning that creditors will be required to cease all attempts to collect the debts owed or repossess property. This automatic stay applies to foreclosure proceedings, so by filing for bankruptcy, a person may be able to prevent the loss of their home. However, if a bankruptcy case is dismissed, a person is returned to the same position they were in before filing for bankruptcy, and creditors will be able to resume foreclosure proceedings.

A recent case in Pennsylvania illustrates how the dismissal of a bankruptcy case may affect foreclosure proceedings. In this case, a homeowner filed for Chapter 13 bankruptcy to prevent the foreclosure of their home. Because the debtor did not file all of the necessary documents, the bankruptcy court dismissed their case. The debtor filed a motion for reconsideration, and the court granted this motion and reinstated the bankruptcy case. However, between when the case was dismissed and when it was reinstated, the lender resumed foreclosure proceedings and sold the home. While the debtor argued that the automatic stay for the initial bankruptcy filing should have applied, the court ultimately ruled in the lender’s favor, finding that the lender was allowed to resume foreclosure proceedings following the dismissal of the case.

When you file for bankruptcy, the automatic stay goes into effect. This is a legal order that stops your creditors from continuing their efforts to collect the debt you owe them. It is your chance for a “breather,” a bit of relief from their collection attempts as you organize your bankruptcy case and begin the process of repaying and discharging your debt.

There are two notable exceptions to the automatic stay: child support and spousal support payments. When you file for bankruptcy, you must continue to make these payments.

Credit card debt is one of the most commonly reported reasons why individuals file for bankruptcy. Credit cards make it easy for users to lose track of how much they spend, causing them to accrue large debt balances. One reason for this is that credit cards can make an individual feel like he or she has more disposable income than he or she actually has. Another reason is that many people harbor misconceptions about credit cards and debt, sometimes misunderstanding critical information until they are taught the truth about credit and debt as part of their required credit counseling for filing for bankruptcy.

A common misconception about credit cards is that carrying a balance on a card increases the user's credit score. Technically, “carrying a balance” refers to any point in time that the user has unpaid charges on his or her account. Colloquially, the term is used to describe the practice of paying off less than the amount billed each month, thereby “carrying” unpaid charges into the next billing cycle.

Carrying a High Balance to Raise your Credit Score is a Fallacy

There is no limit to the number of times you can file for bankruptcy. When your personal debt amount reaches a level where it is impossible for you to pay it down yourself, Chapter 7 and Chapter 13 bankruptcy are there for you to use to have your debts discharged under court supervision. If you have completed a bankruptcy case before, you know that it can be a difficult process that requires you to cede a significant amount of control to the court. You are also aware of the repercussions that a completed bankruptcy case has for your credit. Even knowing this information, you might still be considering filing for bankruptcy a second time. If you are eligible to do so, consider making this move.

Determining When You Can File for a Second Bankruptcy

Your second bankruptcy cannot immediately follow your first. The chapter of your first and your proposed second bankruptcy determine when you can file your second case.

Many Illinois cities are facing financial difficulties that can potentially be resolved through bankruptcy. According to the policy nonprofit Manhattan Institute, this is exactly what needs to happen. When a municipality is unable to pay back its debt, it may file for Chapter 9 bankruptcy, which allows certain contracts to be broken so the intervening trustee can reallocate money to help the municipality repay its debt. Illinois is not a stranger to this type of bankruptcy; since 1988, three cities in the state have filed for Chapter 9 bankruptcy. This number could have been higher if the Illinois Financially Distressed City Law, an act that created a system that allows financially struggling cities to seek loans, bonds, and financial oversight from a state board in order to avoid bankruptcy, had not been passed in 1990.

How Can a City File for Bankruptcy?