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Chapter 13 offers benefits despite distant discharge date

When most Wayne County residents think about filing for bankruptcy, the images that come to mind are from the Chapter 7 liquidation process. They think of potentially losing some assets like a house or car that are used to secure debts, and they see their debts quickly swept away. Many are less familiar with what happens in Chapter 13 bankruptcy, even though it is an important option to consider.

An important distinction between Chapter 7 and Chapter 13 is the discharge date. This is a technical way of referring to the date on which one's debt is formally forgiven -- or at least, those debts that qualify. In Chapter 7, the discharge date typically comes around four months after the initial filing. In Chapter 13, however, the discharge date will be at least three years down the road, possibly four or five years.

Why, then, would a Wayne County resident opt for a fresh financial start in five years under Chapter 13, when they could possibly see results much, much sooner?

There are a few reasons why people choose Chapter 13 despite the delayed discharge date. One is that they simply may not qualify for Chapter 7, which requires filers to pass what they call a "means test" and can be fairly stringent. Another reason is that Chapter 13 allows filers to keep assets that would likely be liquidated to pay creditors under Chapter 7.

It's also important to consider that bankruptcy affects one's credit report from the date of the filing, not the date of the discharge. Under Chapter 13, that's seven years total, but by the time a debtor reaches the discharge date there may only be a few more years left before one can start rebuilding that score.

Ultimately, the discharge date and accompanying factors are important to consider when seeking debt relief through bankruptcy. A legal professional can help review in detail which options may be right for a particular situation.

Source: Fox Business, "When is a Bankruptcy Officially Discharged?," Erica Sandberg, Aug. 4, 2014

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    Posted by MaryDecember 11, 2015

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    "... I was extremely impressed with Charles' understanding of the bankruptcy laws to the extent that I felt certain that my best interests were always at the forefront. "

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    He helped me thru my 1st bankruptcy and now the second. I had no idea what to expect , but they kept me informed and answered all my questions. Mr. Schneider is the most experienced and knowledgeable lawyer I have ever met. If you have to file call this attorney first!

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