When you are overwhelmed with debt and need to obtain debt relief through Bankruptcy, deciding on which Chapter of Bankruptcy is best suited for you will depend on your personal financial condition. If you need to file for Bankruptcy, contact The Law Offices of R.J.Atkinson. We have helped thousands obtain debt relief through bankruptcy and we may be able to help you. Our Bankruptcy Attorneys can provide you a free bankruptcy evaluation to determine your bankruptcy options and can assist you in determining what is the best course of action for you.
Bankruptcy is a debt relief option that can provide the opportunity to get a fresh financial start. Bankruptcy laws were designed to give honest people a new financial start, free from their burdensome debt. Bankruptcy has been around a long time and millions have filed for bankruptcy to get rid of debt or reorganize their finances. Once you have decided to file for bankruptcy, choosing whether to file Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy is a major consideration. The following is a brief overview of Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy: Debt Liquidation and Debt Elimination
The most popular bankruptcy is Chapter 7. It is often called a “liquidation” or “straight” bankruptcy because it eliminates or “discharges” most debts. Chapter 7 Bankruptcy is available to both individuals and businesses. For people, it is kind of like a going out of business sale. You give all of your property to a trustee appointed by the bankruptcy Court and the trustee in turn sells the “non-exempt” property or in simpler terms the property you are not allowed to keep by law and distributes the proceeds, if any to the creditors. If there is no money available then the court will issue an order saying that any debts are discharged which means the person is no longer obligated to pay the debt. It is eliminated.
In case you are wondering, most people who file for Chapter 7 Bankruptcy in Texas are able to keep all of their property. That’s because the State of Texas allows individuals to keep a generous amount of property such as $30,000.00 worth of personal property, one vehicle per licensed driver in the household, and $125,000.00 equity in a home. There are some debts that Chapter 7 cannot discharge such as child support and certain taxes, but for the most part, a person who is eligible to file for Chapter 7 can eliminate their unsecured debts and keep their property.
Chapter 7 Liquidation Under The Bankruptcy Code cases may be filed by an individual, corporation, or a partnership.
Chapter 13 Bankruptcy: Personal Debt Reorganization or Repayment of Debt
A Chapter 13 bankruptcy is a personal reorganization bankruptcy that provides a way for people to reorganize their debts. It is similar to a Chapter 11 where a business is allowed to operate while getting some breathing room except the difference is that Chapter 13 is for a person and not a business. In essence, you as an individual come up with a repayment plan based on your disposable income, and propose a plan of repayment for a period of 3 to 5 years.
A Chapter 13 Bankruptcy is also called a wage earner's plan since it enables individuals with regular income to develop a plan to repay all or part of their debts. Under Chapter 13, a debtor proposes a repayment plan to make installments to creditors over three to five years with court approval. Chapter 13 Bankruptcy can be a debt relief option for people who have “non-exempt property” that they want to keep. It can also only an option for those individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some money left over to pay towards their debts. Chapter 13 permits individuals to keep their property and is often used to stop foreclosure, stop repossession, and to repay past due child support.
Chapter 13 debtors propose a repayment plan that must be approved by the court, and after completion of their payments under the repayment plan; they receive a discharge for most debts. Chapter 13 Individual Debt Adjustment is not available to corporations or partnerships.
Should you File Chapter 7 or Chapter 13?
Whether you should file for Chapter 7 or Chapter 13 is a question only you can answer, and only after knowing all the facts and possible outcomes as they relate to your particular financial situation.
If we; “The Law Offices of R.J.Atkinson”, were blindly asked in the most general terms whether someone should file a Chapter 7 or Chapter 13; we would probably venture to say that we are partial to filing Chapter 7. That’s because the purpose of bankruptcy of any kind is to obtain a fresh financial start. Chapter 7 Bankruptcy accomplishes starting over fairly quickly without the need of a 3 or 5 year repayment plan. Chapter 7 can eliminate burdensome dischargeable debt while allowing most Texas residents using Texas Exemptions to keep all of their personal property or up to $30,000.00 worth, their home’s equity up to $125,000.00, their car, their wages, and maybe allow them to regain their peace of mind. All that, not to mention stopping creditor harassment, as well as not having to repay any dischargeable unsecured debt such as credit cards, payday loans, medical bills, and certain income taxes.
Now just because we believe the best freshest financial start in Bankruptcy is the cleanest slate which comes as a Chapter 7, doesn’t mean that we are opposed to, or don’t recommend filing for Chapter 13 Bankruptcy. To the contrary, Chapter 13 is sometimes the best and only choice when facing foreclosure, repossession, child support arrears, or back taxes. And, you may not have a choice when you consider your income and The Means Test. Just because you want to file for Chapter 7 Bankruptcy relief, doesn’t mean you are eligible to do so.
If your income exceeds the median income for Texas, you will in all likelihood have to file Chapter 13 as opposed to a Chapter 7. If the bankruptcy "means test," determines that you have the means to fund a Chapter 13 repayment plan, which can come down to $100.00 extra a month after regular expenses, then you are usually required to file a Chapter 13.
Also, if you have received a previous discharge in bankruptcy by way of a Chapter 7 or a Chapter 13 Bankruptcy that was filed in the last eight years, you won’t be eligible to file for Chapter 7. Your only bankruptcy option would be to file a Chapter 13.
Another thing to consider is whether or not you are current on loans secured by collateral you want to keep such as your home or car. You have to be current on a loan in order to reaffirm the debt in a Chapter 7, however whether you are current or behind is irrelevant in a Chapter 13 if you want to keep the collateral, because a Chapter 13 can cure loan delinquency.
So is it Chapter 7 or Chapter 13?
The bottom line is that every situation is different and no 2 cases are the same. Only you can weigh the facts and equities in to make a decision between Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy.
If you have questions about filing for Bankruptcy or need help to make a decision between filing Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy contact the Texas Bankruptcy Lawyers at The Law Offices of R.J.Atkinson for a free initial consultation to discuss your debt relief options. With locations in Austin, Houston, San Antonio, Dallas, Waco, and other cities in Texas, The Law Offices of R.J.Atkinson helps Texans file for Bankruptcy under the Bankruptcy Code.
Call for a Free Bankruptcy Evaluation: 800-436-9056