If you're like most people, you didn't go through life thinking that you would eventually file for bankruptcy. You worked hard for your money, always paid your bills on time, and rarely borrowed money from friends and family. Sometimes, life takes an unexpected turn, and you may find yourself in a difficult situation. Even if you do everything you can to avoid filing for bankruptcy, there are times when bankruptcy is the best option to give you the fresh start that you're looking for.
If you're considering filing for bankruptcy, the best thing you can do is to meet with an experienced bankruptcy attorney. A bankruptcy attorney will be able to help you determine whether bankruptcy is right for you, and if it is, they'll be able to guide you through the process of filing for bankruptcy.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is known as liquidation bankruptcy because the debtor's non-exempt assets are sold by the bankruptcy trustee. Then, the proceeds are distributed to creditors in order to pay against your debts. In most cases, all of the assets are exempt and there are no assets to liquidate. Chapter 7 is the most common type of bankruptcy, and it is generally the quickest.
To file Chapter 7 bankruptcy, you must pass the means test. The means test determines whether your income is low enough to qualify for Chapter 7. If you don't pass the means test, you can file Chapter 13 bankruptcy instead.
The Average Length of a Chapter 7 Case
From the moment you file the bankruptcy petition to your bankruptcy discharge, most Chapter 7 cases take approximately three to five months. This may vary depending on the state or county you live in or on the details of your case. When you meet with a bankruptcy attorney, they'll be able to give you a rough idea of how long your case will take.
Reasons a Chapter 7 case could take longer
Although most Chapter 7 bankruptcies take three to five months, there are some reasons that your case could take longer, including:
- The trustee needs more information from you: At your meeting of creditors, your bankruptcy trustee may ask you to provide more information or documents. Your case may be delayed until you are able to provide this information to the trustee or until another meeting of creditors is scheduled.
- You delayed your personal financial management courses: Before you can receive your bankruptcy discharge, you'll need to take a personal financial management course and file the certificate of completion with the court. If you delay taking this class, your discharge will also be delayed.
- You're trying to discharge your student loans: In most cases, discharging student loan debt is nearly impossible. However, if you believe that repaying your student loan debt will cause you undue hardship now and in the future, you can try to get the loans discharged. If you do this, it's likely that your bankruptcy case will take longer, and it may even be delayed several years.
- A creditor challenges whether a debt should be discharged: If one or more creditors believe that one of your debts shouldn't be discharged, they will file a paper with the court. The court will then have a hearing about the debt, which will add some time to your bankruptcy case.
- The trustee or a creditor disagrees about whether an item of property is exempt: Similar to the point above, you may end up in a disagreement with your creditor about whether a particular piece of property is exempt. This also adds extra time to your case.
Rebuilding Your Credit After Bankruptcy
After filing for bankruptcy, many people are worried that they'll never be able to rebuild their credit or that it will be difficult to do so. However, there are several steps you can take to rebuild your credit following Chapter 7 bankruptcy.
After filing for bankruptcy, it's important that you review your credit report to see if there are any errors. It's no secret that bankruptcy will have a negative effect on your credit report, but it's important to make sure there are no additional errors that could make things worse. Additionally, don't be afraid to get a secured credit card. A secured credit card is more like a debit card as opposed to a regular credit card. With a secured credit card, you'll deposit money into an account, and the amount that you deposit will be your credit limit. By charging small amounts each month and paying as you go, you can gradually work to rebuild your credit.
Some debts, such as student loans, are not dischargeable in bankruptcy. If some of your debts weren't discharged, it's important that you stay current on your bills. Paying bills on time will reflect favorably on your credit report and helps you avoid late fees.