How Long Does It Take To File Chapter 13 Bankruptcy
How Long Does It Take To File Chapter 13 Bankruptcy

How Long Does It Take To File Chapter 13 Bankruptcy

How Long Does It Take To File Chapter 13 Bankruptcy – If you have large debts that you can’t repay, are behind on your mortgage payments, are at risk of foreclosure, are being harassed by bill collectors—or all of the above—filing bankruptcy may be your answer. Or maybe it isn’t.

Bankruptcy can in some cases reduce or eliminate your debt, save your home, and keep those bills at bay, but it also has serious consequences, including long-term damage to your credit rating. In turn, this can hamper your ability to borrow in the future, raise the rates you pay for insurance, and even make it difficult to get a job.

How Long Does It Take To File Chapter 13 Bankruptcy

Bankruptcy cases are handled by federal courts, and federal law defines six different types. The two most common types used by individuals are Chapter 7 and Chapter 13, named after the sections of the federal bankruptcy code in which they are described. Chapter 11 bankruptcy, which often makes the headlines, is primarily for businesses.

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Chapter 7 bankruptcy, the type most people file, is also referred to as an outright bankruptcy or liquidation. A receiver appointed by the court can sell some of your property and use the proceeds to partially repay your creditors, after which your debts are considered discharged. Some types of property can be exempted from liquidation with certain limits. These include your car, your clothes and household goods, the tools of your trade, pensions and a portion of any equity you have in your home. You should list the property you claim as exempt when you file for bankruptcy.

Chapter 13 bankruptcy, on the other hand, results in a court-approved plan for you to repay all or part of your debt over a period of three to five years. Some of your debts may also be discharged. Because it does not require liquidating your assets, a Chapter 13 bankruptcy can allow you to keep your home as long as you continue to make the agreed-upon payments.

Certain types of debt generally cannot be discharged through bankruptcy. These include child support, alimony, student loans and some tax obligations.

There are a number of statutory steps involved in filing for bankruptcy. Failure to complete them may result in your case being dismissed.

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Before filing for bankruptcy, individuals must complete a credit counseling session and obtain a certificate to file their bankruptcy. The counselor should review your personal situation, offer advice on budgeting and debt management, and discuss alternatives to bankruptcy. You can find the names of state-approved credit counseling agencies in your area by calling the federal bankruptcy court nearest you or by visiting its website.

Filing for bankruptcy involves filing a bankruptcy petition and accounting that shows your income, debts and assets. You will also be required to submit some type of means test which will determine if your income is low enough for you to qualify for Chapter 7. If not, you will need to file for Chapter 13 instead- bankruptcy. You also have to pay an application fee, although this is sometimes waived if you can prove you can’t afford it.

You can get the forms you need from the probate court. If you use a bankruptcy attorney, which is usually a good idea, they should be able to provide them as well.

After you file, the trustee assigned to your case will set up a meeting of creditors, also known as a 341 meeting for the part of the bankruptcy code where it is authorized. This is an opportunity for the people or companies you owe money to ask questions about your financial situation and your plans to repay them.

What Are The Pros And Cons Of Filing Chapter 7 Bankruptcy?

Your case will be decided by a bankruptcy judge based on the information you have provided. If the court determines that you have attempted to hide assets or committed other fraud, you may not only lose your case, but also be penalized for prosecution. Unless your case is very complex, you generally do not need to appear in court before the judge.

After you file for bankruptcy—but before your debts can be discharged—you’ll need to take a debtor education course, which will provide advice on budgeting and money management. Again, you must have a certificate showing that you attended. You can get a list of approved debt education providers from the bankruptcy court or from the Department of Justice.

Assuming the court rules in your favor, your debt will be discharged, in the case of Chapter 7. In Chapter 13, a repayment plan is approved. Getting a debt discharged means that the creditor can no longer try to collect it from you.

Both types of individual bankruptcy have some negative consequences. A Chapter 7 bankruptcy will remain on your credit record for 10 years, while a Chapter 13 bankruptcy will generally remain for seven years.

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According to Experian, one of the big three national credit bureaus, “bankruptcy declares the single biggest impact on credit scores.” It can also make you appear to be a bad risk to companies requesting your report, including other lenders, insurance companies and potential employers.

Also note that there are limits to how often you can have your debt paid off in bankruptcy. For example, if you have discharged debt through a Chapter 7 bankruptcy, you must wait eight years before you can do so again.

Unlike corporations and partnerships, individuals can file for bankruptcy without an attorney. It is called filling the case “pro se”. However, because filing for bankruptcy is complex and must be done correctly to be successful, it is generally unwise to attempt it without the help of an experienced bankruptcy attorney.

Even the IRS is sometimes willing to negotiate. You may be able to reduce the amount you owe in tax or spread your payments over time.

How To Remove A Bankruptcy From Your Credit Report

Bankruptcy is sometimes the best way to get out from under crushing financial burdens, but it is not the only way. There are alternatives that can often reduce your debt obligations without the messy consequences of bankruptcy.

Negotiating with your creditors without involving the courts can sometimes work to the benefit of both sides. Rather than risk receiving nothing, a creditor may agree to a repayment plan that reduces your debt or spreads your payments over a longer period of time.

If you’re unable to make your mortgage payments, it’s worth calling your lender to find out what options you have other than filing for bankruptcy. These could include forbearance, which will allow you to stop making payments for a certain period of time, or a repayment plan designed to stretch smaller monthly payments over a longer period of time. Another option may be loan modification, which will change the terms of your loan (such as lowering the interest rate) on a permanent basis, making it easier to repay. However, beware of unsolicited offers from companies that claim they can keep your home out of foreclosure. They may be nothing more than con artists.

If you owe money to the IRS, you may be eligible for an offer in compromise, allowing you to settle with the agency for less than you owe. In some cases, the IRS also offers monthly payment plans for taxpayers who cannot pay their tax obligations all at once.

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Bankruptcy law exists to help people who have taken on an unmanageable amount of debt—often as a result of large medical bills or other unexpected expenses that are not their fault—get a fresh start. But it is not a simple process and does not always lead to a happy ending.

So before you file for bankruptcy, be sure to explore all of your alternatives and be prepared for some of the negative consequences described above. If you decide that bankruptcy is your only viable option — as hundreds of thousands of Americans do each year — remember that the stain on your record won’t be permanent. By using credit carefully in the future and paying your bills on time, you can begin to rebuild your credit and gradually put bankruptcy behind you.

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