There isn’t an easy way to escape debt problems, but liquidation bankruptcy allows you to discharge most forms of unsecured debt in just 4 months or 60 days after the 341 meeting. There are two types of bankruptcy that can be used to eliminate debt, but chapter 7 is the quickest way to escape from debt.
Despite the fact that the laws were tightened in 2005, this has had only a minimal effect on the overall numbers. In the year ending March 2010, 1,057,686 American’s filed chapter 7. Most people who need to discharge debt on credit cards and loans are still able to do so.
Eligibility Criteria for Escaping Debt with Chapter 7 or Liquidation Bankruptcy
- Filing for chapter 7 bankruptcy is only permitted if you’ve not filed during the last 8 years. This isn’t a bar to filing chapter 13, which involves making a series of installments over a 3 or 5 year period.
- You’ll need to pass a means test. There are several facets to the rule, but your family income will need to be below the average for the state you live in. If you are unable to comply, there may be ways that a bankruptcy lawyer can legally reduce your household income so you are able to proceed.
- Any non-exempt assets, such as a valuable collection, sports car or holiday home, must be handed over to a court-appointed trustee. Under the current bankruptcy rules, these assets will need to be realized so that the proceeds can be disseminated to your creditors.
Escape Debt That is Unsecured By Filing for Chapter 7 Bankruptcy
If you owe a creditor money that isn’t supported by collateral, the general rule is that this can be discharged by filing for bankruptcy. This includes credit card debt, unsecured loans, payday advances, IRS income tax (subject to conditions) and repossession deficiencies.
Once you’ve been discharged, request a copy of your credit report. If any of your discharged debts continue to show as active, be sure to get this corrected.
Cannot Escape from Debt That’s Ineligible Under Section 523(a) of the Bankruptcy Code
You may think that bankruptcy and liquidation go hand-in-hand, but this isn’t always the case. Section 523(a) of the bankruptcy code specifies which debts that cannot be legally eliminated. These include student loan debt, alimony, child support, most IRS taxes (with the exception of income tax), divorce settlements and acts of fraud, recklessness or maliciousness that led to the debt.
Is Bankruptcy and Liquidation the Right Option?
If you’re looking to escape debt by filing for liquidation bankruptcy, it is important to assess whether you stand to benefit from doing so. If filing for chapter 7 bankruptcy is in your best interests, you then need to determine whether you are eligible under the 2005 rules. If most of your debts are secured or ineligible, escaping debt won’t be possible. Only you and your bankruptcy lawyer can decide that. You may also wish to explore the main alternatives to bankruptcy before proceeding.