It is now common to see individuals file 2, 3, even 4 personal bankruptcies. As the economy continues to stagnate, we are beginning to see multiple filers more often. Creditors should be on alert.
One of the primary reasons for the US bankruptcy system is to give debtors a “fresh start.” The theory is that a debtor weighed down by mountains of debt will have no rational motivation to work hard and contribute to society because any accumulated wealth will just be taken by his/her creditors. A bankruptcy discharge allows such a debtor the ability to avoid those debts and get on with his/her life. If such a discharge were not available, thousands of American citizens would have no reason to contribute to society and, therefore, become a burden to the rest of the country.
However, an individual debtor may file bankruptcy and receive a discharge of all of his/her debts once every seven years. In addition to being able to “burn” their creditors more than once, multiple filers pose even greater threats. Most first-time filers are unaware of how bankruptcy works (i.e. what can and cannot be discharged, how long the process takes, etc.). On the other hand, multiple filers know what debts can be readily discharged and are better able to “game” the system.
As a result, second (or third, or fourth . . .) time filers often prepare for bankruptcy years in advance by rebuilding their credit, obtaining credit and increasing their debts gradually, with no real intention to repay those debts. This is fraud, plain and simple. As a result, creditors should be on alert for second-time filers.
If you believe that one of your debtors has committee fraud, you should contact a bankruptcy attorney about the “nondischargeability” provisions in the bankruptcy code that may be available to you. The Bankruptcy Code sets forth an extensive list of debts that are nondischargeable. Unfortunately, nondischargeability is not automatic – a creditor that holds such a debt must file a complaint with the Bankruptcy Court seeking to have the debt declared nondischargeable. A nondischargeability complaint must usually be filed within about sixty (60) to ninety (90) days after the debtor files his or her bankruptcy petition.
