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When Are Bankruptcy Debts Discharged?
When individuals choose to file for bankruptcy, their financial situation has usually reached a tipping point. They are so stressed out by the reality of their circumstances that they are – understandably – very concerned about how quickly they can get their eligible debts discharged. When they hear that the bankruptcy process, especially Chapter 13 bankruptcy, takes time, they may panic because they need solutions to their challenges immediately.
Yet, it is important to understand that while eligible bankruptcy debt is not discharged until the bankruptcy process is nearly complete – which can take months or years, depending upon the type of bankruptcy in question – the benefits of the automatic stay go into effect as soon as a filer’s bankruptcy petition has been submitted to the court.
Benefitting from “Immediate” Relief
As soon as the court receives a filer’s bankruptcy petition, it notifies all of the creditors listed in that petition of the filer’s case. Included in that notice is a reminder that the automatic stay – which remains in effect for the duration of a filer’s bankruptcy case – is now in effect. This means that nearly all collection actions and requests for repayment must cease immediately.
Should Texas Filers Choose State or Federal Bankruptcy Exemptions?
Many individuals shy away from filing for bankruptcy because they may have heard they will lose everything they own if they take this course of action. This is a myth. While it is true that those who opt to file for Chapter 7 bankruptcy are at risk of having some of their non-exempt assets sold by the trustee assigned to their case, assets are only sold in a tiny fraction of cases.
With that said, it is vitally important to utilize all bankruptcy exemptions available to you, if you choose to file for Chapter 7 bankruptcy. Bankruptcy exemptions allow you to safeguard certain kinds of property – and certain values of property – from any chance that they will be sold by a trustee in order to repay your creditors. If you file for Chapter 7 bankruptcy in Texas, you are permitted to choose Texas exemptions or you are permitted to use federal exemptions. You cannot mix and match exemptions from both schemes, so making an informed choice about these binary options is important.
Debt Management Plan vs. Filing for Bankruptcy
If you are having a difficult time making the required minimum payments on multiple debts each month, it is time to start exploring your options. Generally speaking, debtors who find themselves in positions like yours tend to benefit from debt management strategies, debt relief opportunities, or both of these approaches. Sometimes, it is in a debtor’s best interests to file for bankruptcy and sometimes it is in a debtor’s best interests to explore bankruptcy alternatives. Under rare circumstances, it can be helpful to take advantage of more than one broad-based strategy.
Many individuals who are struggling with debt for the first time are unsure of how to evaluate all of the options available to them. Debt settlement companies, consumer credit counseling services, and law firms all advertise debt-related solutions targeted to solve different – yet not wholly dissimilar – financial challenges. It can, therefore, be understandably challenging to assess which approach is likely to be most helpful when it comes to an individual’s unique circumstances.
Chapter 7 Bankruptcy Forms: An Overview
Filing for Chapter 7 bankruptcy involves attending a meeting of creditors, participating in two mandatory educational opportunities, and filling out more than one dozen forms. The process of completing Chapter 7 bankruptcy forms is a detail-oriented process that many filers find to be understandably frustrating. Seeking professional assistance to complete these forms can not only make the process easier but doing so can also better ensure that unintentional mistakes or omissions do not lead to a delayed discharge or a rejection of your bankruptcy petition overall.
Schedules, Declarations, and Statements
The majority of required bankruptcy forms for a Chapter 7 filing are referred to as schedules. On each schedule, you will be asked to submit specific information about your case, including:
- A list of your property
- The exemptions you are claiming
- Your secured debts
Personal Bankruptcy: Frequently Asked Questions
If you find yourself avoiding your mailbox and ignoring your phone when it rings because you dread being asked – again – to pay overdue balances on your debts, it may be time to start thinking about filing for personal bankruptcy. Depending on your unique needs and the nature of your financial situation, filing for bankruptcy could help you to achieve a fresh financial start and help to start building a strong, stable financial future.
If you are hesitating to file for bankruptcy because you do not yet have enough information about how the process works and whether pursuing a bankruptcy discharge is the best solution for your circumstances, you can begin formulating an informed approach by reviewing some basic information that is relevant to most filers.
What Are the Primary Differences Between Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7 bankruptcy is made available to low-income filers. Eligible debtors are not required to repay their creditors before benefitting from a discharge. A small minority of filers will have some of their non-exempt assets sold by the trustee assigned to their case in order to repay creditors in order of legally-mandated priority.
When Parents of Minors File for Bankruptcy
When an individual or a married couple is struggling with debt, their response to the situation often impacts others as well. Most urgently, debt challenges tend to affect everyone who lives under the same roof as a debtor. Meaning, if someone is struggling with debt significantly enough that they are considering filing for bankruptcy, their circumstances almost certainly affect any minor children who reside with them. Sometimes, the benefits that bankruptcy can provide children serve as powerful motivations for parents to weather the complexities of the process with grace and determination.
Stability and Stress Reduction
It is not a secret that children crave stability. A child’s sense of whether or not the fundamental structure of their home life is stable can affect everything from their health to their academics. Additionally, if instability remains a driving force in a child’s life for too long, the effects of that reality can ripple all the way into adulthood and even into the next generation’s experience of the world. Similarly, when a child’s home life is unusually stressful – perhaps because a parent is working far too hard and getting far too little sleep as they struggle to catch up on past-due bills – that challenge can impact a child’s well-being profoundly as well.
Will My Car Loan Be Discharged if I File for Chapter 7 Bankruptcy in Texas?
One of the main reasons why individuals start researching the bankruptcy process is that some of their property is at risk of being seized by a creditor. Mortgage lenders may threaten foreclosure, while car dealerships and other retailers of valuable assets paid off via installment contracts may threaten repossession. While the primary benefit of filing for Chapter 7 bankruptcy is usually securing a discharge of eligible debt balances, halting collections actions such as the repossession of a vehicle can also have a meaningful impact on a filer’s financial well-being.
Unfortunately, some filers are under the impression that bankruptcy results in both the end of collections actions of all kinds and the discharge of all kinds of debts. But, just as some collections actions – including those involving overdue child support – are not subject to the restrictions of the automatic stay, some debt balances cannot be discharged outright as a result of the bankruptcy process.
Are You Concerned About Bankruptcy Stigma?
In 2008, the housing market cratered, the banking system was teetering on the verge of collapse, and the economy slowed to a crawl. As a result, millions of Americans lost their jobs and many lost their homes. There was much discussion of why Wall Street was receiving bailouts when Main Street was struggling to keep going, day after day.
This consequential period in American history served as a wake-up call for many who had long-held negative views about the bankruptcy process. After watching massive corporations receive assistance from the government in order to remain afloat while hard-working friends, family, and neighbors were forced from their homes and struggled to buy groceries, a perceptible shift in public attitudes concerning the personal bankruptcy process occurred. What had long been viewed as an abdication of responsibility was now largely perceived as a lifeline for those who had - by and large – suffered hardship through no fault of their own.
What Is a Creditor Matrix?
When an individual files for bankruptcy, the court notifies their creditors of this legal action. The court takes this step partially to protect creditors’ interests and partially to ensure that the filer can benefit from the protection of the automatic stay. In order to effectively notify a filer’s creditors of their decision to pursue a bankruptcy case, the court needs accurate information to identify each creditor and to contact them. This is where a creditor matrix comes into play.
Preparing a Creditor Matrix
A creditor matrix is, essentially, a list of a bankruptcy filer’s creditors presented in a very specific fashion. Each bankruptcy district across the country requires that this information be presented in particular ways. For example, the Western District of Texas – which is where filers from San Antonio and surrounding communities file their cases – has published a full page of instructions concerning how a filer’s creditor matrix should be crafted. From the size of the margins to the capitalization of every word, this sheet of instructions is highly detailed.
What Is a 341 Meeting of Creditors?
Filing for bankruptcy is an involved process. Regardless of whether you opt to file for debt relief under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you will have to navigate multiple steps and meet a myriad of requirements before you can secure a discharge of your qualifying unsecured debts. For example, although the safeguards afforded by the automatic stay will protect you from most collections actions while your case remains active, you will need to attend a meeting with your creditors before you can rid your mind of their power over your finances completely.
What to Expect
A filer’s 341 meeting of creditors is generally held in a conference room. This is a semi-professional gathering, so it is important to dress and behave respectfully. In attendance will be the filer, their attorney, and the trustee assigned to the filer’s case. Creditors are allowed to attend this meeting in order to ask questions and clarify information. However, unless a creditor’s interest in the filer’s case is complex or truly significant, it is unlikely that a creditor will send a representative to the meeting.
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