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Discharge dates differ with Chapter 7, 13 bankruptcies

Washington residents who have filed for bankruptcy are probably waiting with bated breath to find out when their official discharge date will arrive. The discharge is the final settlement, or formal forgiveness, of qualifying debts that occur after a bankruptcy petition has been fully processed. So, how do you know when your discharge date is set to occur? The answer can be different for Chapter 7 bankruptcy and Chapter 13 filers.

For Chapter 7 bankruptcy, also known as liquidation bankruptcy, filers are generally able to walk away from unsecured debts at the end of the process. The only requirements include filling out paperwork, completing the court process and then waiting for the discharge. That final accounting should occur about four months after the courtroom process is complete. At that point, the filer does not owe any additional money to the creditors.

For Chapter 13 bankruptcy, however, the discharge date may be a little later. Chapter 13 bankruptcy involves the adjustment of debts, not a total discharge. Under these plans, filers must make partial payments through the courts. After three to five years, the debts are finally discharged -- providing that they qualify and are unsecured. In most cases, Chapter 13 filings occur because the debtor's financial status is not eligible for a Chapter 7 bankruptcy proceeding. Some filers may also choose the Chapter 13 option so they can keep some of the assets they may be required to forfeit if they choose Chapter 7.

It can be difficult to know whether Chapter 7 or Chapter 13 bankruptcy is the best option for your personal situation. A little bit of research can help you know the right questions to ask when you approach your legal and financial professionals about your bankruptcy options. Every person's financial situation is different, but you may have remedies available to counteract your overwhelming debt.

Source: Fox Business, "When is a Bankruptcy Officially Discharged?" Erica Sandberg, Aug. 04, 2014

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