Bankruptcy
Bankruptcy allows people struggling with debt to wipe out certain obligations and start with a clean slate. The two primary bankruptcy types filed—Chapter 7 and Chapter 13 bankruptcy—each offer different benefits, and, in some cases, treat debt and property differently, too. The type of chapter that’s right for you depends on your income, property, and goals.
Here are some of the things you can expect bankruptcy to do:
Stop Creditor Harassment and Collection Activities Once you file, the court puts in place an order called the automatic stay. The stay stops most creditor calls, wage garnishments, and lawsuits, but not all. For instance, creditors can still collect support payments and criminal cases will continue to proceed forward. Stop a Foreclosure, Repossession, or Eviction (at Least Temporarily) The automatic stay will stop all of these actions as long as they’re still pending.
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Evictions : An eviction that’s still in the litigation process will come to a halt after a bankruptcy filing. But the stay will likely be temporary. Keep in mind that if your landlord already has an eviction judgment against you, a bankruptcy won’t help in the majority of states.
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Foreclosure and repossession : Although the automatic stay will stop a foreclosure or repossession, filing for Chapter 7 won’t help you keep the property. If you can’t bring the account current, you’ll lose the house or car once the stay lifts. By contrast, Chapter 13 has a mechanism that will allow you to catch up on past payments so you can keep the asset.
Wipe Out Credit Card Debt and Most Other Nonpriority Unsecured Debts :
Bankruptcy is very good at wiping out unsecured credit card debt medical bills, overdue utility payments, personal loans, gym contracts. In fact, filing for bankruptcy can wipe out most nonpriority unsecured debts other than school loans. How quickly your debt will get wiped out will depend on the chapter you file:
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Chapter 7 bankruptcy : This chapter takes an average of three to four months to complete.
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Foreclosure and repossession : If you file for Chapter 13 rather than Chapter 7, you’ll likely have to pay back some portion of your unsecured debts through a three- to five-year repayment plan. However, any unsecured debt balance that remains after completing your repayment plan will be discharged.