Beebe and O'Neil

How and when to file for Chapter 7 bankruptcy

According to MarketWatch, bankruptcy filings are at the lowest point since 2007. This is great news for people in Connecticut who may worry about the odds of falling off track financially. However, even though the adds are less stacked against them, many people still find themselves in court trying to discharge their personal or business debts.

Another eye-opening fact cited by MarketWatch is that people may choose not to file for bankruptcy because they view it as an additional expense. If they can hardly afford to keep up with bills, if at all, they may not believe they can afford to file. Another disturbing finding is that older Americans are filing at alarming rates due to lower income levels but higher health care costs.

When consumers realize they have too much debt, they need to take action as soon as possible. Credit Karma identifies these as some of the top indicators that it is time to file for Chapter 7:

  •          Consumer already negotiated with creditors to reduce debt as much as possible
  •          Consumer worked with credit counselor
  •          Consumer tried to consolidate the debt

If after doing all of this, an individual still finds that their debt load is unmanageable and they have been unsuccessful at increasing their income, it may be time to file. Within 180 days of filing, the individual must complete bankruptcy counseling through an approved agency. They may then need to pass a “means test.” If they are successful with these first two steps, they may file a petition.

The filing process generally takes up to 100 days from the filing point to the discharging of debts. The wait period may act as a sort of pause on the debts remaining. During this time, the individual may need to attend a creditor meeting and complete another course on financial management. At the end of this process, if successful, the debts are discharged. It is important to verify what debts a person may still be held responsible for. Student loans debts, for example, may still remain.

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