Overwhelming debt can be met and mitigated with a successful bankruptcy filing. However, a bankruptcy filing will only be successful or as useful as it can be if it is filed correctly, starting with its type. Bankruptcy is sorted into multiple Chapters, each benefitting different types of debtors.
When Chapter 7 Might Be Your Best Choice
People with overwhelming debt and little promise of future income usually choose to file for Chapter 7 bankruptcy. Sometimes called the liquidation bankruptcy, Chapter 7 can be an efficient way to discharge large quantities of unsecured debt, possibly leaving you with no debt at all. In Chapter 7 bankruptcy, you might risk some of your property to collections, seizure, and liens. Although, you can cite either federal or state bankruptcy exemptions in Texas when filing. Exemptions protect certain properties valued under certain price limits from the consequences of bankruptcy, no matter how much debt you owe.
There are also certain debts that cannot be discharged with a Chapter 7 bankruptcy. Owed child support, tax debts, criminal fines, and student loans are the most common examples of non-dischargeable debts.
When Chapter 13 Might Be Most Useful
Chapter 13 bankruptcy is sometimes called the “wage earner’s plan” because it is most useful if you are in overwhelming debt but still earn a regular income or wage. In a typical Chapter 13 process, you will work with your bankruptcy attorney and creditors to negotiate your debt amount down. Next, the reduced debt amount is structured into a repayment plan, which can last anywhere between three and five years. As long as you are responsible with your finances and make an honest effort to pay as much of your debt as arranged by the repayment plan, any amount that remains after it ends is likely to be discharged.
This type of bankruptcy is usually the one to pursue if it is an option. It is far less drastic on your finances and credit score than Chapter 7 since it looks for a middle ground that benefits both you and creditors. After all, creditors know that getting something is better than getting nothing, as they might if you file for Chapter 7. With this in mind, creditors should be willing to negotiate a repayment deal, and everyone should feel less stress from the situation overall.
Discover Your Best Choice in Bankruptcy with Our Help
The Law Offices of W. David Stephens in Lufkin was founded on the idea that people deserve honest, reliable legal counsel when facing bankruptcy. We are here to give you guidance that makes sense, and genuine moral support that keeps you confident in your financial future. Using our decades of legal experience, we can help you find the bankruptcy Chapter that works best for you, and get you started down the path to financial relief sooner than you might think.
Give us a call at (936) 298-5388 to arrange for a free consultation about your bankruptcy options.