Overwhelming financial situations can snowball, especially if credit cards are used to pay bills associated with unexpected situations such as a layoff or medical emergency. If creditor harassment and dwindling resources are resulting in the inability to handle even basic expenses, an individual may want to address unsecured debts through a Chapter 7 filing to obtain the quickest discharge. In a Chapter 7 case, a discharge may be completed as early as four months after the filing is concluded.
In some cases, Chapter 7 may not be possible due to ineligibility. A financial means test is used to determine eligibility, and those who don't qualify may have to consider Chapter 13. In this filing, adjustments may be made to the obligations included, allowing an individual to make reduced payments on designated debts for a period of time ranging from three to five years. Upon conclusion of this period, a discharge of additional balances may occur, resulting in an individual's ability to meet other needs.
It is important to remember that Chapter 7 stays on a credit report three years longer than Chapter 13. While the relief is experienced sooner, the credit implications last a decade. With this in mind, an individual considering Chapter 7 may want to speak to an attorney about the pros and cons of each option.
If bills have spiraled out of control, a quicker resolution may be ideal, and an attorney may be able to clearly define steps to take in compiling debt and debtor information. An attorney may also be able to assist with issues such as car loans and home mortgages by discussing how these may be addressed in the bankruptcy.
Source: Fox Business, "When is a Bankruptcy Officially Discharged?", Erica Sandberg, August 04, 2014