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.
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 Test, 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, if any. 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 three to five-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 debt relief 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. With discharged debts, you are no longer obligated to pay back your creditors.
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.
Bankruptcy is not your only option to getting out of overwhelming debt. There are several bankruptcy alternatives for individuals to consider, including:
One of the most common ways to avoid bankruptcy is through debt consolidation, including options such as consolidation loans or debt settlement. Many individuals work with a trusted debt relief company to guide them through the debt consolidation process.
Accredited Debt Relief is a financial services organization dedicated to providing debt settlement solutions and savings to individuals, families, and businesses struggling with debt across the U.S. With an A+ rating from the BBB and a history of successfully helping clients resolve their debts without bankruptcy, we can help you find the debt relief program that works best for you.
United States Courts - Chapter 7 Bankruptcy Basics: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics
United States Courts - Chapter 7 Means Test: https://www.uscourts.gov/forms/means-test-forms/chapter-7-means-test-calculation
United States Courts - Chapter 13 Bankruptcy Basics: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics
© 2020 Accredited Debt Relief. Please note that all calls may be recorded or monitored for quality assurance and training purposes.
* The company is an affiliate of Beyond Finance, Inc. Beyond Finance, Inc., is a servicing provider for most debt consolidation services offered by the company. Beyond Finance's clients who make all monthly program payments pay approximately 68%-75% of enrolled debt (including fees) upon successful program completion. Programs range from 12-48 months. On average, Clients receive their first settlement within 4-6 months of enrollment. Not all Clients complete the program. Estimates are based on prior results and may not match your results. We cannot guarantee that your debts will be resolved for a specific amount or percentage or within a specific timeframe. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting, legal advice or credit repair services. Program is not available in all states; fees may vary by state. The use of these services will likely adversely affect your credit. You may be subject to collections or lawsuits by creditors or collectors. Your outstanding debt may increase from the accrual of fees and interest. Read and understand all program materials prior to enrolling. Additional information for Maryland residents, click here.
Certain types of debts are not eligible for enrollment. Some creditors are not eligible for enrollment because they do not negotiate with debt consolidation companies.
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