Understanding discharge dates in different bankruptcies

An Illinois resident may be eager to see their debt gone when filing for bankruptcy, but the discharge rules can be different based on the type of bankruptcy filing in progress. Chapter 13 involves an adjustment of payment terms for up to five years, meaning that it is not a complete liquidation of one's unsecured debts. In a Chapter 7 scenario, many unsecured debts can be liquidated, meaning that payments are no longer required on discharged debts. The discharge in a Chapter 7 bankruptcy can be completed approximately four months after the filing, resulting in prompt relief from issues such as out-of-control credit card debt, medical bills and other financially stressful bills.

In some cases, an individual or couple may not be able to elect Chapter 7 due to financial standing. If the means evaluation demonstrates that one is ineligible for Chapter 7, a Chapter 13 plan may be sought to achieve reduced payments on debts for the duration of the repayment period. At the end of the three to five year stint, additional balances on the debts in consideration may be discharged. Although Chapter 7 offers rather immediate relief from unsecured debt, it imposes a longer impact on one's credit report. Chapter 7 remains on a credit report for 10 years, three more years than a Chapter 13 is listed.

Determining which bankruptcy option is better may require some time spent with a bankruptcy lawyer to assess one's financial situation. Although Chapter 7 may be an option, it may be important to consider long-term goals prior to making a final decision.

Every household's needs are unique, and bankruptcy often allows someone to get a fresh start after a difficult financial period. Medical bills can be a common source of stress after a major illness, an unexpected hospital stay or an injury, and bankruptcy may allow this accumulated debt to be eliminated.

Source: Fox Business, "When is a Bankruptcy Officially Discharged?", Erica Sandberg, August 04, 2014

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