When an individual reaches a point where their debts have become impossible to repay they may seek assistance through the bankruptcy court. Prior to filing for bankruptcy, the debtor (the person owing the money) may be subject to various recovery actions by the creditor (the lender). These actions include court and collections agents. Once a debtor files for bankruptcy, all collection activities must stop. If the court approves the bankruptcy petition, then some or all of those debts are wiped. When we refer to discharge, we are talking about the wiping of those debts and the end of the bankruptcy process.
How long does the bankruptcy process take? This depends on how you process your bankruptcy petition. In most cases, debtors have two choices – a Chapter 7 petition and a Chapter 13 petition. Under the Chapter 7 petition, the debtor is seeking maximum relief. There are guidelines as to eligibility and debtors may find they have to surrender assets that can be sold to help pay off the outstanding debts.
There is a minimum 60-day period for a Chapter 7 petition. This allows creditors to review the bankruptcy petition and time to file any disputes. Once this 60-day period has expired, some debtors can be discharged in three or four weeks. For more complex cases, it can take longer.
The Chapter 13 bankruptcy petition (often called the worker’s petition), requires a repayment period. This period will take between three and five years depending on the amount of disposable income available to meet these payments. A debtor can expect to be discharged a week or two after that last payment has been made.