How to Become Debt Free Using Bankruptcy Law

AS of 2009, the total U.S. household debt—including credit card balances and mortgages—was 13.5 trillion which amounted to $43,874 per residents, according to the Wall Street Journal. People with tremendous amount of debt typically look for options to become debt free. Bankruptcy, a legal process, allows people to become debt free either by eliminating or repaying debts.

Individuals Should Determine Which Bankruptcy Options Is Best

Personal bankruptcy has two options, chapter 7 and chapter 13. Chapter 7 provides people—unable to pay their debts—a way to eliminate them without repaying. However, people may have to turn over property considered non-exempt to bankruptcy trustees. The trustees sell the items and gives any money to creditors.

The bankruptcy means test determines whether people are eligible for chapter 7 bankruptcy. Individuals use the formula which requires them to deduct monthly expenses from their currently monthly income. Then they must compare the total left over to their state’s median income for the same size household. If people have less than the median income, they are eligible for chapter 7. However, if their disposable income is too high, they are eligible for chapter 13. Under chapter 13, people follow a bankruptcy court-approved repayment plan which requires them to repay creditors in monthly payments to the trustees.

File For Bankruptcy

Individuals must undergo credit counseling within 180 days before filing bankruptcy. Then they can file bankruptcy and receive an automatic stay. The automatic stay, which remains in place throughout the life of the bankruptcy cases, stops creditors from pursuing debt collection. For instance, creditors are prohibited from pursuing wage garnishments, filing lawsuits or trying to take property such as homes.

There Is A Timeframe To Become Debt Free

The timeframe for people to become debt free depends on the type of bankruptcy they choose. For instance, chapter 7 bankruptcy takes approximately three to six months to expunge all debts. However, chapter 13 bankruptcy takes longer. Since repayments are involved repayment plans can vary, but takes three to five years to complete. Once the last payment is made the debts are successful discharge.

Consult A Bankruptcy Attorney About Filing For Bankruptcy

Anyone considering bankruptcy should consult a bankruptcy lawyer. Although people can file on their own, it best to an experience bankruptcy lawyer to help with all legal complexities such as filing all the appropriate paperwork.

Think Bankruptcy Might Be for You?