What to Expect During a Bankruptcy Filing Process
Introduction
If you are struggling with overwhelming debt, bankruptcy could be an option for you. Bankruptcy can help get rid of most, if not all, of your debts and provide a fresh start financially. However, before you decide to file for bankruptcy, it's important to understand what the process entails. This article will go over what you can expect during a bankruptcy filing process.
Chapter 7 vs Chapter 13
The first thing you need to know when considering bankruptcy is that there are two types of bankruptcy for individuals: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a liquidation process that wipes out most types of unsecured debt, like credit card debt, medical bills, and personal loans. It's a relatively quick process that typically lasts three to six months. On the other hand, Chapter 13 bankruptcy is a reorganization process that allows you to keep your assets while you repay a portion of your debts over a three to five year period.
Bankruptcy Counselor
Before filing for bankruptcy, you must first complete a credit counseling course from a government-approved agency. This course will help you determine if bankruptcy is the best solution for your financial situation or if there are other options available to you. You will also need to complete a debtor education course after filing for bankruptcy.
Filing Process
To file for bankruptcy, you'll need to gather all of your financial information, including your income, assets, debts, and expenses. You'll then need to complete and submit a petition for bankruptcy and other required documents to the bankruptcy court. Once your forms have been filed, an automatic stay will go into effect, which stops most collection actions against you.
Meeting of Creditors
A few weeks after filing your bankruptcy petition, you will need to attend a meeting of creditors, also known as a 341 meeting. This meeting is conducted by a bankruptcy trustee who will ask you questions about your debts, assets, and financial affairs.
Bankruptcy Discharge
After the meeting of creditors, you will need to complete a debtor education course. If you filed for Chapter 7 bankruptcy, you could receive a discharge of your debts in as little as three to six months after filing. If you filed for Chapter 13 bankruptcy, you will need to complete your repayment plan before receiving a discharge.
Impact on Credit Score
Filing for bankruptcy will have a significant impact on your credit score. It can stay on your credit report for up to ten years, and it will likely make it difficult for you to obtain credit in the future. However, as time passes and you work to rebuild your credit, your credit score will gradually improve.
Conclusion
Filing for bankruptcy is a major decision that should not be taken lightly. It's crucial to understand the bankruptcy filing process, including the different types of bankruptcy and the impact it can have on your credit score. If you're considering bankruptcy, it's important to consult with an experienced bankruptcy attorney who can guide you through the process and help you make the best decision for your financial situation.