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The Curious Bag
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Although never good financial planning and generally advised against, you can eliminate or reduce debt by filing for bankruptcy. However, not following the bankruptcy laws can remove this option for you.
Identification
Receiving a discharge after filing for bankruptcy protection means that you have the legal right to not pay back certain debts and that creditors must cease asking for repayment.
Types
How your discharge occurs depends on the bankruptcy chapter you file under. In a Chapter 7 bankruptcy, the debt discharge typically occurs about four months after the debtor filed for bankruptcy protection. In Chapter 11, 12 or 13 bankruptcies, debt discharge can take up to four years to go into effect.
Features
The courts require that a person seeking a bankruptcy discharge take a finance management course. Failing to do so will revoke a discharge unless a good reason exists.
Function
So long as the debts are covered by the law of the type of bankruptcy under which you filed, you will receive an immediate approval for a discharge, unless someone objects to the order.
Misconceptions
A debt discharge may remove the obligation to pay back debts, but it does not remove liens (collateral against the debt) already issued before application for bankruptcy.
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