Filing for bankruptcy is a serious decision that can have lasting consequences for your financial future.
However, for some people, it may be the only way to get out of overwhelming debt and start fresh.
But how long does it take to file for bankruptcy, and what are the steps involved? The answer depends on the type of bankruptcy you choose, the complexity of your case, and the assets you have.
In this article, we will explain the differences between Chapter 7 and Chapter 13 bankruptcy, the requirements and procedures for each, and the average time it takes to complete the process.
We will also discuss some alternatives to bankruptcy that you may want to consider before making your final decision.
Bankruptcy Attorney
These legal professionals specialize in guiding individuals or businesses through the complexities of bankruptcy, offering invaluable assistance in various aspects.
Here’s how a bankruptcy attorney can assist you:
- Assessment and Qualification:
- Evaluate your eligibility for bankruptcy.
- Recommend the most suitable type of bankruptcy based on your circumstances.
- Asset Protection and Creditor Management:
- Advise on safeguarding your assets during bankruptcy proceedings.
- Assist in managing interactions with creditors.
- Paperwork and Court Procedures:
- Guide you through the intricate paperwork required for bankruptcy.
- Provide support in navigating court procedures.
- Representation and Negotiation:
- Represent you in court proceedings related to bankruptcy.
- Negotiate with creditors on your behalf.
To find a reputable bankruptcy attorney near you, explore these resources:
- American Bar Association:
- National lawyer organization with a referral service. Locate attorneys based on location or name.
- National Association of Consumer Bankruptcy Attorneys:
- Specialized association for consumer bankruptcy cases. Find attorneys by location or name.
- Lawyers.com:
- Online directory offering details on lawyers’ practice areas, ratings, and reviews. Search for bankruptcy attorneys based on location or name.
Chapter 7 Bankruptcy
Checking on Chapter 7 bankruptcy involves discharging unsecured debts like credit cards and medical bills, but it comes with specific steps and considerations. Here’s a concise overview:
- Pre-Filing Requirements:
- Complete a credit counseling course before initiating the process.
- Means Test Eligibility:
- Pass the means test, comparing your income and expenses to state medians. High income may affect eligibility.
- Filing Process:
- Submit a petition and required forms to the bankruptcy court.
- Pay a filing fee (e.g., $338 as of 2021).
- Information Submission:
- Provide detailed financial information to the court and an appointed trustee overseeing your case.
- Creditors Meeting:
- Attend a meeting of creditors, addressing inquiries from the trustee and creditors about your finances and bankruptcy.
- Asset Surrender (if applicable):
- Surrender nonexempt assets to the trustee for selling, with proceeds distributed to creditors. Nonexempt assets lack bankruptcy protections.
- Debtor Education Course:
- Complete a debtor education course before receiving a discharge.
- Discharge Order:
- Receive a court-issued discharge order, eliminating eligible debts and preventing further creditor actions.
Bankruptcy Discharge
Receiving a bankruptcy discharge is a pivotal moment, freeing you from specific debts and providing a financial fresh start.
While it’s a beneficial step, it comes with important considerations:
- Timing and Eligibility:
- Chapter 7 discharges typically occur around four months after filing, contingent on passing the means test. In Chapter 13, it follows the completion of a three to five-year repayment plan, subject to income and debt limits.
- Non-Dischargeable Debts:
- Certain debts, such as taxes, student loans, child support, fines, and fraud-related debts, may not be discharged in bankruptcy.
- Impact on Secured Debts:
- Discharge doesn’t affect creditors’ liens or security interests. Secured debts like mortgages or car loans retain the ability to repossess or foreclose if payments default.
- Credit Score Implications:
- A bankruptcy discharge influences credit scores, staying on the credit report for 10 years (Chapter 7) or seven years (Chapter 13). Rebuilding credit involves responsible bill payments and judicious credit usage.
- Potential Challenges:
- The court, trustee, or creditors may challenge, deny, or revoke the discharge for reasons like incomplete education courses, asset concealment, false statements, non-cooperation, or plan violations.
Bankruptcy Pros and Cons
Debt Settlement Lawyer
They aid clients in reducing their debt balance, cutting down interest charges, and securing more favorable repayment terms.
Additionally, they leverage their legal expertise to handle lawsuits and address unfair collection practices by lenders.
Engaging a debt settlement lawyer offers various advantages:
- Financial Evaluation and Guidance:
- Assessing your financial situation, they provide advice on the optimal debt relief avenue—be it debt settlement, consolidation, management, or bankruptcy.
- Creditor Communication:
- Acting as an intermediary, they communicate with creditors and debt collectors, putting an end to harassing calls, letters, or legal actions.
- Negotiation Expertise:
- Utilizing negotiation skills, they engage with creditors to settle debts for less than the total amount owed, resulting in long-term cost savings.
- Rights Protection:
- Safeguarding your rights, they shield against scams or unlawful practices by debt settlement firms or creditors.
- Legal Representation:
- In the event of a lawsuit by a creditor or debt collector, they can represent you in court, mounting a defense against claims or judgments.
To find a debt settlement lawyer in your vicinity, explore resources like:
- The American Bar Association: Utilize their lawyer referral service to locate a debt settlement lawyer based on location or name.
- Lawyers.com: This online directory provides details on lawyers’ practice areas, ratings, reviews, and contact information for finding a debt settlement lawyer.
- Web Search Results: Leverage search results from tools like mine to delve deeper into information about debt settlement lawyers and their offered services.
Proof Of Claim
A proof of claim is a crucial document filed by a creditor in a bankruptcy case, signaling their right to payment from the debtor.
This document, typically using the official bankruptcy Form 410, outlines essential details about the claim, such as type, amount, and reason.
By doing so, it informs the bankruptcy court, debtor, and trustee about the creditor’s claim, aiding the trustee in determining the rightful payment from available bankruptcy estate funds.
Key Points:
- Filing Deadline and Process:
- The timeframe and process for filing a proof of claim vary based on the debtor’s bankruptcy type. Generally, creditors have 70 days (or 180 days for government creditors) from the bankruptcy filing date to submit their claim.
- Accessing Form 410:
- Creditors can obtain Form 410 from the United States Courts website or explore search results from my tool for additional insights.
- Payment Hierarchy:
- Filing a proof of claim doesn’t guarantee payment. Payment prioritization follows the hierarchy of secured, priority, and unsecured claims. Secured claims hold a lien on the debtor’s property, while priority claims, like taxes and child support, receive special treatment.
- Claim Challenges:
- The court, trustee, or debtor may dispute, deny, or challenge a proof of claim for reasons like fraud, error, or rule violations. In such cases, a creditor might need to attend a hearing or trial to substantiate their claim.
- Legal Guidance:
- Consultation with a bankruptcy attorney before filing or during contested claims is advisable. An attorney can assist in protecting creditor rights, interests, and optimizing recovery. Explore web search results from my tool to find a bankruptcy attorney nearby.