If you’re in extreme financial difficulty, with creditors hounding you, then one option might be to go bankrupt. The social stigma that has always been associated with bankruptcy remains to a lesser extent today, than in the past. This article looks at the most common method of filing for bankruptcy in the United States, which is known as “Chapter 7”.
WHAT IS CHAPTER 7 BANKRUPTCY?
This method of going bankrupt will normally result in most of your debt being discharged, meaning you won’t need to repay what you owe – however, some (or maybe even all) of your assets may be collected and liquidated in or to settle the outstanding debt.
HOW MUCH DOES BANKRUPTCY COST?
Some might consider the cost associated with going bankrupt to be quite ironic, as surely, if someone is claiming bankruptcy they are clearly not in the financial position to afford legal fees. However, many people appreciate the support and advice of having an attorney handle their case, in which case, there are plenty of attorneys that can help with bankruptcy filing that will cost less than $1,000.
HOW LONG WILL IT TAKE?
A simple chapter 7 bankruptcy takes around three months for the process to be completed, but for many, four to six months is an average timeline from the time they hire a law firm until the case is completed.
ELIGIBILITY FOR GOING BANKRUPT
Eligibility for chapter 7 bankruptcy proceedings are based on a variety of factors including income and whether you have filed bankruptcy in the past. The most significant stumbling block is whether the court considers you did not file your case in good faith, as this way, you might not be able to obtain a discharge from bankruptcy; an example of bad faith would be to conceal assets or misstate your income.
THE MAIN BENEFIT OF GOING BANKRUPT
In addition to the obvious benefit of no longer having responsibility for the debt you owe, chapter 7 bankruptcy will provide an injunction that stops creditors from collection activities including wage garnishments and lawsuits. Essentially, this means that a lot of the stress is put on hold – as the credits cannot go after your home or car without authority from the court. It means that all the stress and hassle of being pursued by creditors will stop.
GOING TO COURT
The idea of going to court might seem a scary prospect, yet, for most people the meeting in court will take only 5-10 minutes. The appointment is known as a “meeting of creditors” where you will meet with the trustee to discuss your case. You will then normally receive a discharge in around sixty days.
WHAT IS A DISCHARGE?
Once the bankruptcy process is complete the court will discharge you from the responsibility of your debt; meaning, in law, you no longer owe the amount you owe – the debt is essentially written off, and wiped clean.
There are however, certain types of debt that can’t be discharged in bankruptcy such as student loans and tax debt. The other aspect to consider is that if a creditor complains of bad faith (e.g. you obtained the credit fraudulently) then the Court is unlikely to discharge you of your responsibility for that particular debt.