Today's economy has left many people unable to meet all of their obligations. Sometimes debt can get out of control, especially when faced with unemployment or disability. There are plenty of options to assist those who are overwhelmed by debt including refinancing, debt management plans and bankruptcy. When assets are at a minimum and there is no way to make ends meet, bankruptcy may be the best option.
Most consumers file either a Chapter 13 or a Chapter 7 bankruptcy. In a Chapter 13 case, the debtor repays a portion of the debt owed, usually over a three to five year term. During this time, a trustee will oversee the payments and they will closely control spending and finances. A Chapter 7 bankruptcy offers consumers a fresh start as it will eliminate the majority of unsecured debt. Chapter 7 bankruptcy is a good solution for consumers who have a limited income and will not have the means to support themselves while repaying their debt.
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There are several advantages to filing a Chapter 7 bankruptcy. Typically, the case is closed within three to six months from the date of filing. At the completion of the process, the debt is eliminated and the consumer can start a new financial life. Another advantage is that the creditors must stop attempting to collect a debt once the bankruptcy is filed. This not only puts an end to calls and notices, but it also ends wage garnishments, repossessions and foreclosure proceedings.
There are a few drawbacks to filing a Chapter 7 case. Certain debts are not dischargeable in the bankruptcy and they will have to be repaid. This includes student loans, child support and tax obligations. If these items are the bulk of the debt, a Chapter 7 case may not help get finances under control. Additionally, by filing Chapter 7, certain property may be liquidated or sold to pay off some of the outstanding debt. Although this does not happen often, it is still a possibility.
The filing process for Chapter 7 is simple. It requires the filing of a petition, schedules of debts, property and assets and a statement of finances. After this is accepted, a meeting of creditors will be scheduled. This meeting is with the Trustee assigned to the case, the debtor, and any creditors that wish to attend. After this meeting, any assets that are not exempt will be sold and profits will be distributed among the creditors. If no other issues arise, the case is then discharged within the next six months and all of the eligible debt is erased.
Chapter 7 bankruptcy can help those struggling financially start over and rebuild their credit. The process is straightforward and it may be the fastest way to eliminate the burden and stress of uncontainable debt. Although bankruptcy can be filed by an individual, contacting a lawyer will ensure that the forms are filed properly and the bankruptcy goes through as quickly as possible.
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