BANKRUPTCY PROCEEDINGS

CHAPTER 7

A chapter 7 bankruptcy proceeding can give a debtor a fresh start by releasing the debtor from certain debts, which they cannot afford to pay. It is mostly used when the debtor is having trouble making the monthly payments on unsecured debts. Unsecured debts generally include credit cards, medical bills and personal or signature loans.

Debts that are not dischargeable in chapter 7 are secured debts such as a house note or a car note and priority debts like taxes or child support obligations. Secured debts are generally dealt with by either returning the item to the creditor or keeping it and continuing payments. Priority debts like taxes must generally be paid in full but a payment plan is usually arranged. Taxes can be dischargeable, but the tax laws require certain conditions to be met.

Upon filing chapter 7 the debtor is protected from foreclosures, repossessions or any collections including harassing phone calls, letters and lawsuits. Assets that are exempt (protected by law) in Texas and cannot be touched by the bankruptcy court are the debtor's home, car, furnishings, clothing and other personal possessions, so long as debtor is able to make regular payments on these items, and, the value of your personal property, excluding your home and cars, does not exceed $60,000 with a family and $30,000 without a family.

To determine how a chapter 7 could help you, we urge you to discuss your case with an attorney. A business can also file a chapter 7. If you have a business and are considering chapter 7, we urge you to consult with an attorney.

CHAPTER 13

A chapter 13 bankruptcy proceeding is designated to improve the debtor's financial condition by giving the debtor time to pay all or a part of his or her debts over time. It is used most often when the debtor is behind on home mortgage payments, car notes, property taxes, income taxes or child support. A chapter 13 may also be used when the debtor has property, which may not be protected under a chapter 7 bankruptcy filing.

Upon filing the chapter 13 the debtor is immediately protected from foreclosures, repossessions or collection activity, including harassing phone calls, letters, lawsuits, and garnishments.

The debtor must have regular income and must make monthly payments to a chapter 13 trustee for payments to creditors. The average chapter 13 plan is three years but may be up to five years depending on the debtor's monthly income and expenses. Most debtors are happy to discover that monthly payments are reduced because of the ability to reduce the interest rate on some debts and extend the repayment period for up to 60 months.
Chapter 13 may be filed individually or jointly regardless of the debtor's marital status. A chapter 13 also protects anyone who may have co-signed on behalf of the debtor.

To decide if a chapter 13 would help you with your financial problems, we urge you to discuss your case with an attorney.