Emerging from bankruptcy means to successfully come through bankruptcy after a reorganization or elimination of debts. Although in common usage the term "emergence" generally applies more to corporate bankruptcies, it also describes the end of the personal bankruptcy process. For all types of bankruptcy, "emergence" occurs only after the court grants written approval in the form of a discharge.
When you successfully complete your bankruptcy, the court will send you a notice of discharge. At this point, you have technically emerged from bankruptcy. The notice itself is basically a form letter that all debtors receive at discharge, with the only personalization being a listing of your case number. The discharge notice does not contain a listing of the specific debts you discharged. However, it is probably the most important document you will receive in your bankruptcy, since it frees you from repayment of your debts.
Chapter 7 Emergence
Of the two main types of personal bankruptcy, Chapter 7 emergence occurs much more rapidly. In most cases, you can get a discharge of your debts and emerge from Chapter 7 bankruptcy in between three and six months. Since Chapter 7 bankruptcy is a liquidation bankruptcy, you may not receive your discharge until the courts sells some of your assets to help pay your creditors. However, most Chapter 7 case are "no-asset" cases, in which creditors receive nothing. Discharge usually comes at the shorter end of the time period for no-asset cases.
Chapter 13 Emergence
Emergence from Chapter 13 bankruptcy takes much longer than a Chapter 7. Unlike Chapter 7, in which creditors are paid from available assets of the debtor, in a Chapter 13 a debtor must make monthly payments to help satisfy debts. Depending on the income of the debtor, a Chapter 13 can last either three or five years. After the payment plan is completed, the court will grant a discharge in short order.
The most obvious positive effect of emerging from bankruptcy is that you are no longer responsible for some or all of your debts. In most cases, you can wipe out two of the most common types of debt, medical bills and credit card debt, when you receive your bankruptcy discharge. However, certain debts survive after you emerge from bankruptcy, including most tax debts and student loans. Even after emerging from bankruptcy, you will carry the mark on your credit report for seven years in the case of a Chapter 13 bankruptcy, or 10 years in the case of a Chapter 7.
Dismissal of your bankruptcy case means that you did not receive a bankruptcy discharge. In the case of dismissal, you cannot be considered to have "emerged" from bankruptcy because the effect is almost as if you had never filed for bankruptcy in the first place. You are still legally liable for all of your debts, and your creditors can continue to pursue you for collection. A dismissal can result if you fail to file appropriate paperwork or do not follow court procedures.
- Nolo.com: An Overview of Chapter 13 Bankruptcy
- Nolo.com: What Is Bankruptcy?
- United States Courts: Discharge in Bankruptcy
- Experian: Credit Advice
- Bankruptcy Law Network: Bankruptcy Basics, What Does It Mean If My Case Is Dismissed?
- The Law Offices of Sutton & Sutton: Common Questions Regarding Chapter 7 Bankruptcy
- United States Courts: Form B18
- Jupiterimages/Photos.com/Getty Images
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