If you are in a financial crisis, stopping collection attempts from creditors and finding debt relief may be a high priority. For those struggling with a significant amount of debt, bankruptcy may be the best option if you’ve explored other solutions for dealing with debt. Bankruptcy can provide a clean slate without overwhelming debt hanging over your head.
Bankruptcy isn’t a decision to take lightly. A bankruptcy filing is a legal process that can have long-term consequences.
How long does a bankruptcy filing take? This is often a concern for someone feeling the sting of a difficult financial situation, there are no absolute answers to this question. The length of time it will take to discharge your debt obligations through bankruptcy will vary depending on the specifics of your financial situation, the amount of debt you have and the type of bankruptcy you are seeking.
Chapter 7 is a form of liquidation bankruptcy. Under Chapter 7 bankruptcy, all nonexempt assets will be reviewed and sold off with the help of a bankruptcy trustee. The bankruptcy court will pay your creditors with the proceeds of those sales and discharge remaining unpaid unsecured debts.
Under Chapter 7 Bankruptcy, only unsecured debts are discharged. Secured debts such as a mortgage or a car loan require you to either relinquish them or continue paying according to the terms of the loan.
A Chapter 7 bankruptcy filing may be completed in three to seven months.
Chapter 13 bankruptcy reorganizes your debts. When you file for Chapter 13, the court evaluates your total debt obligations (including both secured and unsecured debt) and sets a court-ordered repayment plan that typically spans 3-5 years. Under this plan, repayment is typically equal to the value of your nonexempt assets.
A Chapter 13 filing can take anywhere from 24-60 months to complete depending on the amount of your debt and the repayment plan that is established.
A bankruptcy discharge is the ultimate goal for bankruptcy filings -- no matter what type you choose. In a bankruptcy discharge, the debtor is no longer required to pay what they owe on debts covered under the filing. What is discharged depends on the type of bankruptcy that was filed and the determination of the courts.
It’s important to note that bankruptcy won’t eliminate all debts. Some types of debt including student loans, alimony, child support, and some back taxes can’t be discharged in a bankruptcy filing.
Bankruptcy cases can be complicated and the laws vary from state to state. For anyone considering bankruptcy as an option, it’s important to consult with a reputable bankruptcy attorney before moving forward. An attorney will help you asses your financial situation and determine which type of bankruptcy program is right for your needs. If you need assistance finding a bankruptcy attorney in your area, Start Fresh Today offers an attorney locator to help. For those who are having difficulty paying legal fees, the American Bar Association and Legal Services Corporation offer assistance to those in need.
Before you can discharge a bankruptcy, federal law requires that all consumers who file must take credit counseling and debtor education courses. The credit counseling course must take place before you file. Debtor education begins after you file. Your bankruptcy attorney will provide you detailed information about the requirements you must fulfill to discharge a bankruptcy. Start Fresh Today offers both of the required bankruptcy courses for consumers in both English and Spanish.
While bankruptcy can help eliminate some of the heavy stress that comes with debt, bankruptcy does have some significant drawbacks. The record of your filing will stay on your credit report for 7-10 years and will have a significant impact on your credit score. In addition, a bankruptcy filing will be part of the public record.
Before you decide on bankruptcy, be sure to consider all of your debt-relief alternatives, including debt consolidation, to ensure you’re making the best decision for your future.
The team at CESI is committed to helping you make wise financial decisions and to helping you understand how to get out and stay out of debt. For a free debt analysis, contact us and find out how we can help.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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