In Debt? How Consolidating Your Credit May Help

Meeting with a bankruptcy attorney to discuss your possible options can feel like a dramatic and scary moment. It's important to understand, however, that a bankruptcy lawyer is trying to help you get a fresh start in dealing with your finances. There are a lot of issues to address, but you can benefit from learning about these four big ones.

Two Kinds of Bankruptcies

You can petition the court for one of two types of bankruptcies. First, there is liquidation. This is a process that leads to most of your disposable assets being sold to pay off as much of your unsecured debts as possible. Unsecured debts are ones that aren't backed by anything real, such as a car or house.

Second, you can ask to set up a restructuring plan. This approach requires proof that you'll have the resources needed to pay off a reduced amount within three to five years. Notably, this approach may allow you to restructure some of your secured debts too.

Also, filing for one type of bankruptcy does not preclude using the other process. There are various ways to file for one and then the other, but a complicated bankruptcy should be discussed at length with a lawyer.

Who Decides?

Most of the decision-making is done by a trustee. A judge will be assigned to the case, but the judge will appoint a trustee, usually someone with a background in bankruptcy law and accounting. The trustee will review your filing and provide a recommendation to the court. While the judge isn't required to follow the trustee's guidance, you can almost bet they will.

Note that creditors will have a say in the process, too. A meeting of your creditors will be convened to allow anyone who objects to your petition to state their case.

How Long Does It Take?

As long as things go smoothly, you can expect the Chapter 7 liquidation process to take between four and six months. The Chapter 13 restructuring process initially takes around 95 days, and then you'll have between three and five years to complete the repayment plan. Generally, the case will be finalized within weeks of finishing repayment. Commercial bankruptcies may take a bit longer due to the amount of documentation involved and the likelihood that some creditors will object.

Can You File Again?

You must wait 8 years between liquidations. Restructuring is allowed every two years between filing dates, meaning you can effectively seek one immediately after completing a repayment plan.