Although 2020 is in the rearview mirror, millions of Americans are still struggling to get back on their feet after a year of diminished financial opportunities, medical challenges and mounting debt.
For some families in Texas who face daily creditor harassment, threats of eviction or foreclosure in the not-too-distant future, the options can seem very limited. In a situation that may feel impossible to resolve, it may be useful to consider personal bankruptcy.
Working with a knowledgeable bankruptcy attorney serving both Southern and Northern Districts of Texas can help you to find solutions that will put you back on firm financial ground.
Chapters 7 and 13
The two main types of personal bankruptcy are Chapter 7 and Chapter 13 of the Federal Bankruptcy Code. Depending on which of these an individual is eligible to file as determined by state law, medical debt, some IRS tax debts and unsecured debt such as credit card balances may be eligible for discharge. In Texas, the filer may use federal or Texas exemptions to retain some property.
A Chapter 7 filing puts an immediate stay on wage garnishment, foreclosure proceedings and creditor harassment. Most if not all unsecured debt will be discharged, as well as most medical debt. The filer may also keep exempt property, and although not all non-exempt property will be liquidated, a court-appointed trustee will inventory much of it in order to satisfy repayment of debts to creditors.
A Chapter 13 filing is a reorganization proceeding in which a court-appointed trustee oversees the discharge of some debt and the repayment of other debt obligations. This process allows the individual to catch up on back payments through a structured repayment plan that permits filers to keep the family home and car, with a repayment plan of three to five years for most other debt.
What bankruptcy can and cannot do
A bankruptcy filing can and cannot do certain things. It gives people filing Chapter 7 a chance at a fresh start, and for Chapter 13 filers a chance to regain control of their finances without having to lose everything and start over.
With bankruptcy, the individual may discharge debt, stop creditor harassment, utility service interruption, wage garnishment and foreclosure proceedings and prevent repossession of a car or other property.
A bankruptcy, however, cannot prevent a creditor’s right to hold property such as the family home or car as collateral for debt repayment. It cannot discharge divorce debt such as child support or alimony, student loans or criminal fines. And it cannot protect cosigners who may then have to repay all or part of such loans.