Bankruptcy allows a person to start fresh financially. In a bankruptcy petition, the debtor will list all of his assets as well as all his creditors. It is imperative that the debtor is completely honest on the bankruptcy petition. Failure to be honest can mean no discharge of the debt and in certain cases fraud charges may be brought. A debtor cannot sell or transfer assets for a certain time period before filing or while the bankruptcy is pending.
Bankruptcies will remain on a credit report from 7 to 10 years depending on the particular credit reporting agency. Individuals will either file Chapter 7 or Chapter 13. It will depend on specific circumstances as to which Chapter is the best route to take.
Chapter 7 is also known as liquidation. This allows a debtor to give up assets and in return, debts are discharged. This is the best choice for those who have little to no assets, low income, and a lot of debt. Chapter 7 tends to take 4-5 months from the time the petition is filed until the discharge is granted. Chapter 7 will discharge most debts; however some debts will not go away. These include the following: child support, alimony, student loans, and fines, fees, and restitution in criminal cases.
The other type of bankruptcy filed by an individual is Chapter 13. This is the best choice for those with significant assets (home, vehicle, boats) who have a regular income. In a Chapter 13, a plan will be developed for repayment of debts and will last from 3-5 years depending on the debtor’s income.