An individual might choose a bankruptcy when a life event, such as a job loss, divorce or medical emergency, causes a disruption in income or a complete lifestyle change. For a consumer, when income is disrupted, and debts can be repaid, a chapter 13 may be the best option to repay any home, vehicle or tax arrears over a period of 3 to 5 years. In other situations, such as when the mortgage has not fallen behind, or income is below average, a chapter 7 may be the best option. It is important to consult with a bankruptcy attorney since bankruptcy is extremely complex. Your circumstances may not fit neatly into the descriptions listed here.
The term of a bankruptcy depends on the chapter you have filed, your repayment plan and your current monthly income. If you have filed a chapter 7, your case is likely to last 3 to 5 months. In a chapter 13, the term is 36 to 60 months. In a chapter 7, the term is shorter because you are not proposing a repayment plan.
Debtor: the individual, couple or business who owes money
Creditors: the entities who loaned the individual, couple or business money
Trustee: The individual who administers the bankruptcy estate
United States Trustee: part of the Department of Justice that oversees bankruptcy cases and trustees
Judges: the person who resolves disputes
Petition: the paperwork you file to declare bankruptcy
Automatic Stay: automatic bankruptcy protections which begin as soon as you file. While the stay is in place, your creditors cannot write you, call you, sue you or continue with any pending actions such as a lawsuit or foreclosure.
Discharge: the goal of a bankruptcy. If you complete your bankruptcy case and follow all the bankruptcy rules, you will receive a discharge. If you receive a discharge, your creditors cannot ask you to repay a discharged debt. Discharged debts include credit cards, medical bills, payday loans, repossessions and certain taxes.
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