The only legal way to eliminate most consumer debts is Chapter 7 bankruptcy. Other remedies, such as debt consolidation, credit counseling and Chapter 13 bankruptcy work as forms of debt reduction but do not eliminate legal responsibility for most debts.
Eligibility
Chapter 7 debt elimination is reserved for people who make less than their state's median income. Those who fail a federal means test are ineligible.
Time Frame
Legal debt elimination can take four to eight months to complete. Chapter 7 is reflected on a credit file for 10 years.
Exceptions
Some debts can never be liquidated under any bankruptcy or other debt program. These include child support, alimony, court fines and taxes less than three years old.
Student Loans
Student loans can be placed into hardship programs by the lender. However, only in rare cases where there is permanent disability are these eligible for debt elimination.
Assets
Debt elimination usually means giving up assets such as stocks, a home, excessive cars or jewelry, and banking accounts. Retirement plans are exempt.
Considerations
As of October 2009, filing for Chapter 7 debt elimination without an attorney costs about $300.
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