Which Type of Bankruptcy Is Best for My Financial Situation?

 Posted on August 26, 2020 in Chapter 13

Bankruptcy is often seen as a last-ditch effort to overcome the financial burden that you may be experiencing. While this is typically the case, the level of debt that one may be in can vary greatly depending on their circumstances. Some may have no income and are struggling to pay basic bills, while others may have a steady income but have found themselves buried by exponential medical or credit card expenses. There are two common ways that Texans can file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy. By looking at your unique circumstances, you can determine what type of bankruptcy filing is appropriate.

Chapter 7

When imagining what filing for bankruptcy looks like, people often imagine something along the lines of Chapter 7 bankruptcy. Also known as “liquidation bankruptcy”, this form of bankruptcy has the trustee sell the debtor's property and use the money collected to pay off their debts, as close to the total amount as possible - all remaining debts will be forgotten. This form of bankruptcy may seem preferable to some, since the process only takes about six months and some debts may be forgotten, but it is not available to all debtors. If the debtor’s income falls below the state’s median household income, which in Texas is $59,570, he or she is eligible to file for Chapter 7 bankruptcy. The debtor will not lose all of his or her assets during the bankruptcy process, since some personal property can be claimed exempt from the process.

Chapter 13

For those who have a steady, dependable income, Chapter 7 bankruptcy is not an option. These debtors will file for Chapter 13 bankruptcy, which involves formulating a payment plan over a three- to five-year period. In other words, none of their debts are forgotten and they are expected to pay it off in time. However, Chapter 13 filers will not be required to give up any of their property or assets to pay off their debts as long as they follow the terms of their payment plan. A portion of their paycheck will go towards these unpaid debts once their basic needs are met.

So, Is Bankruptcy Really Best for Me?

You may still be wondering if filing for bankruptcy is your best course of action. You should consult a bankruptcy attorney for advice on whether your financial difficulties warrant filing for bankruptcy. Even before speaking with an attorney, you can take your own financial inventory to really see where you are at. Take a look at the following financial areas to gauge your need to file for bankruptcy:

1. Debts. Take account of all of the debts looming over you. This includes any unpaid credit card bills, overdue loans, or other outstanding balances. List these debts in one area to give yourself a general estimate of your financial burdens.
2. Monthly Costs. Next, list out your monthly expenses below your total debts. This should include any monthly bills, such as rent, utilities, food, and more. You can estimate some of your monthly costs but should include anything that you purchase on a regular basis.
3. Income. Look at your income from the past six months, excluding social security. If you have a spouse, include their income in your calculations. By looking at your current debts and monthly expenses, you may be able to re-budget your income to begin paying off these debts.
4. Assets or Property. Do you have an extra car that you rarely use? Or perhaps you have a vacation home that you are willing to part with. Before filing for bankruptcy, consider your other options to obtain the money you need to pay off your debts. If you do not have any additional assets or any that you are willing to part with, you may need to seriously consider filing for bankruptcy.

Contact a New Braunfels Bankruptcy Lawyer

Making the executive decision to file for bankruptcy can be one of the most difficult, and humbling, decisions you have to make. The stigma that surrounds bankruptcy often leaves people putting off the inevitable and continuing to build up debt in the meantime. If you are struggling financially, turn to the Law Offices of Chance M. McGhee for advice. Our compassionate legal team provides free consultations to allow potential clients to discuss their case before making a decision. Rather than allowing things to stack up and become even more burdensome, contact our San Antonio bankruptcy attorney for help at 210-342-3400.

Sources:

https://www.consumeraffairs.com/finance/bankruptcy_02.html

https://www.census.gov/quickfacts/TX?