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Bankruptcy Prejudice Periods

There are many reasons that a bankruptcy Court may dismiss a case. The reasons for dismissal range from simple procedural mistakes and missed deadlines to blatant fraud. In the Southern District of Florida, most dismissals are with a 180-day prejudice period. This bars the debtor from filing another bankruptcy for that period of time.

What does this mean for you as a Debtor filing in the Southern District of Florida? The results can be harsh in that even the smallest of procedural mistakes – including not filing the correct document – can lead to a dismissal which prohibits you from filing another case immediately. It can put you at risk of litigation and judgments which would have otherwise been stayed by the filing of the bankruptcy. Because of this, it is important to discuss your case with an experienced attorney to ensure your case proceeds smoothly and it isn’t at risk of being dismissed.

Following the dismissal of a case with prejudice, the only way to file a case during the prejudice period is to motion the court to reduce the prejudice period. You will need to show the Court good cause for the dismissal and why the Court should allow you to immediately file another case. A Debtor may face opposition from Creditors if Creditors believe the Debtor is seeking to shorten the prejudice period in bad faith. The bankruptcy code does not define bad faith, however, bankruptcy courts around the country have issued opinions defining this matter – a topic for another discussion.

In most instances, if the Court allows a Debtor to shorten the prejudice period and file a new bankruptcy, the automatic stay will be in effect for only 30 days. The Debtor will be required to file a Motion asking the Court to extend the automatic stay beyond the 30 days for the duration of the bankruptcy. This motion must be filed and heard within 30 days of filing the case. If a Debtor fails to file a Motion to Extend the Automatic Stay, the stay will be lifted on the 31st day, and Creditors will be permitted to continue their collection efforts.

As outlined in section 362 of the bankruptcy code, the court may grant a debtor a second bite at the proverbial apple. However, the case under additional scrutiny to ensure it was not filed in bad faith and it is in compliance with all requirements. More importantly, a Trustee may seek dismissal of the case as a result of a Debtor’s failure to extend the automatic stay.

A Debtor, or potential Debtor, should discuss the filing of multiple bankruptcies with an experienced attorney to understand the complexities involved with multiple filings. As this adds another layer of complexity.