A Chapter 7 or a Chapter 13 bankruptcy filing can help relieve the burden of overwhelming debt, but they are very different in how they go about providing a "fresh start."
Many individuals who are suffering from overwhelming debt may consider filing a bankruptcy. One question they often have is how long does the process take. As with many things in law, the answer is, "it depends." It depends on the type of bankruptcy you file. Most consumers file either a Chapter 7 or a Chapter 13.
These two types of filings have very different timelines and your bankruptcy attorney can explain many of the differences between the two chapters, but the basic difference is that a Chapter 7 is for borrowers who qualify under the means test and who have no secured debts. It is relatively quick and the discharge, or the elimination of many of your debts, can often occur within six months of your filing.
A Chapter 13 is a longer process and typically lasts three to five years depending on the facts of your case. A Chapter 13 is for borrowers with stable income and who have secured debts, such as a home mortgage or a motor vehicle. If you do not qualify for a Chapter 7 due to the means test, you will likely be able to file a Chapter 13.
Chapter 7 timeline
Before you file for a Chapter 7, you should speak with an experienced bankruptcy attorney, who can review your financial history and help you with the means test and check to make certain you do not have any recent bankruptcy filings that would disallow a new filing. In addition to the means test, you need to complete a required credit counseling class before your discharge is issued.
When you file, you have 15 days in which to file your bankruptcy schedules, which detail your income, assets and debts for the trustee and court. The court will notify your creditors of your filing, as the "automatic stay" begins with your filing and prohibits all collection activity by creditors.
Statement of Intentions
Within 30 days of filing, you will file a Statement of Intentions, which will indicate the property you intend to keep and pay for and the property you will surrender. You can reaffirm a debt, redeem the property or surrender and your attorney can explain these options work.
You then have 45 days from the filing of your statement of intentions to the meeting of your creditors, often referred to as your "341 meeting." This is an informal meeting where your creditors may attend and ask you questions about your filing. It is held at the offices of the Chapter 7 trustee, and while it is informal, you will be under oath and attendance is mandatory. If you fail to appear, your bankruptcy will be dismissed. In the vast majority of cases, no creditors appear and it is frequently over within a short time.
Your discharge is ordered within 60 days of your 341 meeting. If there are no problems with your Chapter 7 case, such as prior filings or objections by creditors, the entire process it is likely to complete in less than six months.
Chapter 13 timeline
One of the most significant differences between a Chapter 7 and a Chapter 13 is the duration. A Chapter 13 often requires five years to complete. Because of this, it is much more complex and demanding, but the benefit is you may be able to prevent a foreclosure, keep your home, pay off mortgage arrears and keep your vehicles.
Assuming you have not had a discharge from a previous Chapter 7 within the last four years or a Chapter 13 within the last two years, you may file a Chapter 13. You do not need to take a means test for this type of filing, but you still will need to take an approved credit-counseling course to ultimately obtain your discharge. Your attorney can provide information on these courses.
The filing deadline is similar to Chapter 7, but in addition to your schedules, you have to file a repayment plan, also called your Chapter 13 plan. This plan, which your attorney will help you to create, is effectually a budget of your payments over the life of the plan, which lasts three to five years. You make these payments to the Chapter 13 trustee, who supervises your bankruptcy.
341 meeting and plan confirmation
There will be a 341 meeting and your attendance is mandatory, and assuming there are no objections to your plan by your creditors, your plan will be confirmed. You have to begin making payments prior to confirmation and failure to make your plan payments will result in your trustee filing a motion to dismiss your bankruptcy. After plan confirmation, there is no further action by the court unless you miss payments to the trustee.
Between three and five years after your filing, you should have completed all of your plan payments and at that point, you will receive a discharge. During a Chapter 13, it is absolutely essential that you maintain your payments to the trustee.
If you have suffered an unexpected loss of income or another calamity that makes it impossible to make your payments on time, you will need to amend your plan. This action will likely require and attorney to assist you and you will need court approval. The trustee and creditors may object if they do not believe your reasons for modification are genuine.
A bankruptcy attorney can help with the process
While the concept of a fresh start from a bankruptcy is simple, the execution can be complex and an experienced bankruptcy attorney can help you with all of your questions.