Common Bankruptcy Questions, Part I

Bankruptcy filing is a process that is unfamiliar to most and yet still carries an unfair stigma. As a result, there are all sorts of various questions that commonly come up when a person begins the bankruptcy process. It is helpful to begin a discussion today of those questions.

The question asked the most, and the one at the central of every single case, is whether a person should file bankruptcy. Of course, there is no clear cut answer to this question and a case by case analysis is necessary from your bankruptcy attorney. Generally speaking, though, a person with a mountain of debt, low income to debt ratio, low income, or all of the above should consider their financial future and whether it is feasible to continue without bankruptcy. Filing for bankruptcy helps secure a fresh start to a person's financial future, so if the choice comes down to that, or struggling for years to pay off a mountain of debt, then filing bankruptcy is probably the best option.

Another common question is how long the bankruptcy process takes. Determining that depends on which Chapter of the Bankruptcy Code the case is filed under. If it is a Chapter 7 bankruptcy, the case usually lasts 120 days from filing until discharge. In a Chapter 13 bankruptcy, however, the case lasts from 3-5 years depending on the plan that has been submitted to the court. Either way, at the end of each of these time periods a fresh start has been achieved.

Clients also wonder if bankruptcy will ultimately result in a clean credit report after they file. More specifically, whether the negative items that precipitated the bankruptcy filing will be removed from the credit report after filing. In this case, it is not so much that bankruptcy actually removes the items as it indicates that they were included in a bankruptcy filing. You no longer have an obligation to pay these debts as that notation on the credit report indicates. This illustrates that a discharge of these debts was achieved and at that point you can be well on your way to rebuilding your credit.