Bankruptcy is a legal proceeding designed to help individuals or businesses who can’t repay their debts. The ultimate goal of this process is to give the filer a fresh financial start while providing a fair outcome to their creditors. Although it can give financial relief to many, bankruptcy comes with long-term financial and legal consequences.
There are a few different types of bankruptcy that can be filed in the United States, but individual filers will choose between Chapter 7 or Chapter 13.
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Chapter 7 involves liquidation and discharging all qualifying debts so that you no longer have to make payments. In order to qualify, you must pass the Chapter 7 Means Test1, which the bankruptcy court uses to determine your ability to repay your debts. If you earn less than the average for your state and cannot afford to pay a minimum monthly payment, you may qualify for Chapter 7 bankruptcy.
Commencement of a bankruptcy creates an “estate,” which becomes the temporary legal owner of all your property. The trustee, who is appointed by the bankruptcy court, administers the estate and gathers and sells your nonexempt assets. The trustee then uses the sale proceeds to pay creditors. The court will ultimately decide which assets are exempt.
At the end of the bankruptcy process, the court will discharge your unsecured debts like credit cards, medical bills, personal loans, car accidents judgments, some tax debts and garnishments. Non-dischargeable debts generally include child support, most student loans and most tax debts.
Chapter 13 aims to reorganize your debts. The court will require you to make an affordable monthly payment as part of a strict 3 to 5-year payment plan. If you make all your payments, your unsecured debts may be discharged.
Although bankruptcy can provide relief to many, it may not be the best option for everyone. It is highly recommended that you speak with an attorney before proceeding with a bankruptcy filing.
Debt Discharge: The biggest benefit of filing for bankruptcy is the potential to have your debts discharged. You are no longer obligated to pay back your creditors when your debts are discharged.
Protection of Important Assets: Most bankruptcy filings protect your home and main vehicle, making it possible to continue commuting to work and living in your home.
No More Collection Calls: Debt collectors are not allowed to continue collection activities while the bankruptcy case is pending in court.
Negative Impact on Credit: Bankruptcy filings can stay on your credit report for 7 to 10 years. This may cause problems if you intend to apply for credit in the future.
Not All Debts are Covered: Most student loans, alimony, child support and fines or fees owed to the government are not eligible to be discharged.
Long-Term Consequences: Bankruptcy usually means giving up on credit cards or loans until you can rebuild your credit.
Enrolled Debt: $43,922
Final Debt: $21,403
Enrolled Debt: $21,974
Final Debt: $12,797
Enrolled Debt: $24,954
Final Debt: $10,634
* These examples do not include program fees. This is small sample of debt settlements our negotiation team has achieved for our clients. These settlements were obtained for clients who successfully met all of their program terms and received settlement offers. Results may vary, and there are no guarantees that all creditors will agree to settle. These examples are not representative of results in all cases.
Accredited Debt Relief has helped customers across the country consolidate and resolve their debts. With an A+ BBB rating, we offer customized financial solutions that can help you pay off your debt obligations quicker. Our experienced team can help lower your monthly payments and reduce what you owe overall. To learn more and receive a free, no obligation consultation, contact us today.
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