The discharge of debts at the end of bankruptcy proceedings is often the primary purpose of the process for filers. Those with insurmountable levels of debt can eliminate some of their financial obligations as a result of a filing. A discharge reduces what debts someone must pay, making it easier for them to balance their budget and meet their other financial obligations.
Individuals who file for personal bankruptcy derive numerous benefits, including an automatic stay that temporarily prevents collection activity. The courts need time to review their circumstances and determine if they are actually eligible for a discharge. In most cases, the automatic stay on collection activity persists until the courts either discharge someone’s debt or dismiss their bankruptcy filing.
Occasionally, creditors can file a lawsuit to lift the automatic stay during the bankruptcy in specific circumstances. Most of the time, filers won’t have to worry about collection activity or lawsuits until they complete the bankruptcy. Despite the other benefits involved in the process, the discharge of someone’s eligible debt is the ultimate goal of the process. How long does it typically take to achieve that goal?
Bankruptcy can take months or years
Individuals filing for bankruptcy usually choose between Chapter 7 and Chapter 13 proceedings depending on their income and current financial resources. A Chapter 7 bankruptcy is only an option for people who can pass a means test that compares their income with the state median. However, it is the fastest route to the discharge of someone’s debts. In some cases, it may only take a couple of months to go from the initial filing date to the discharge of someone’s unsecured debts in a Chapter 7 case.
Chapter 13 filings take significantly longer. Before someone might qualify for a discharge, they have to complete a multi-year repayment plan. They will need to make anywhere from three to five years of structured payments to their creditors through the bankruptcy trustee overseeing their case. It is only after negotiating and completing a repayment plan that someone can go back to court and secure a discharge from a judge.
Depending on the current volume of cases going through the courts, the type of bankruptcy someone files and even the unique factors in their case, bankruptcy could last for a season or more than half a decade. Understanding the likely timeline for bankruptcy proceedings can empower those trying to take control of their financial obligations to make informed choices accordingly.