What Happens to The Amounts you Owe when You File Bankruptcy? 

Filing for bankruptcy is a big decision and can also have a huger impact on your credit. Usually you will need the assistance of a bankruptcy attorney. Bankruptcy filing can also be done by yourself but you will need to make sure that everything is filled out correctly which could ultimately be very time consuming. The help of an attorney will make the process go a lot smoother. Depending on which chapter you file, the amounts you owe will diminish a little bit differently.

Chapter 7 Bankruptcy

When you file for chapter 7 bankruptcy, the debt that you owe will completely go away after the bankruptcy will discharge. You will not owe any creditors there after. Chapter 7 bankruptcy law can only wipe out debt that you had prior to filing for bankruptcy. If you accrue any new debt after bankruptcy filing, you will be responsible for owing that debt. It takes about four to five months for your bankruptcy to be approved. There is a process that the filing has to go through before it is taken to court. Once you appear at your 345 meeting, the bankruptcy will discharge in about a month. However, once bankruptcy is filed, creditors cannot reach out to you to try and obtain any debts owed. That would be considered illegal.

Chapter 13 Bankruptcy

Chapter 13 is a bit different than chapter 7 bankruptcy. When you file for chapter 13, you get on a repayment plan. You will still owe your creditors but you won’t owe as much as you did prior to filing. You will be able to make smaller monthly payments to your creditors. Your debt will not go away until you have completed your payment plan entirely. It works in a similar way as chapter 7 does. All creditors that you have prior to filing for bankruptcy will get wiped out. Anything remaining will not be wiped out.

If you want help filing either chapter you should consult a bankruptcy attorney. You can also check out Fair Fee Legal Services if you would like a consultation or more information on which chapter is best for you. Some people that owe a lot of debt tend to lean more towards filing chapter 7. If you owe a lot of debt but you feel it is still manageable, chapter 13 may be best for you. They will be more than happy to assist you.