What a Personal Bankruptcy Filing Can Do for You | Your Filing Options
If you’re like many folks across Texas and the United States, the pandemic has hit you where it can hurt the most—in your pocketbook. You may be among the millions who lost a job or saw reductions in your hours. You may have fallen behind in mortgage, automobile and other payments, with creditors hounding you incessantly, calling at all hours or sending you threatening letters. You’ve never considered a bankruptcy filing before, and you’re uncertain how it can benefit you, as well as the different ways you can get a fresh start.
The Benefits of a Bankruptcy Filing
The American bankruptcy laws, which have been around in some form for over 220 years (the first such law was enacted in 1800), have always been about giving people an opportunity for a fresh start. Legislators recognized more than two centuries ago that citizens can be prudent, make good financial decisions, and pay close attention to the bottom line, but still face financial hardship through circumstances beyond their control, such as personal injury, medical issues, the loss of a job or the death of a spouse.
One of the most powerful components of the American bankruptcy laws in the “automatic stay.” This provision goes into effect immediately upon the filing of any bankruptcy petition (Chapter 7 or Chapter 13) and prohibits your creditors from calling you, sending you letters, filing or pursuing legal action or making any other efforts to collect a debt from you other than through the bankruptcy court. As long as you abide by the agreement you make with creditors and the bankruptcy court, the stay will remain in effect until your bankruptcy is finished.
The Different Types of Personal Bankruptcy Filings
Though there are other types of filings available in unique situations, the two most common personal bankruptcy filings are under Chapter 7 and Chapter 13.
- A Chapter 7 petition, known as a “liquidation,” allows you to permanently rid yourself of the legal obligation to pay certain debts in exchange for your relinquishment of property to the bankruptcy court. That property is typically sold, with the proceeds used to satisfy your creditors. Some debts may not be discharged (or may be extremely difficult to discharge), such as family law obligations (child and spousal support), most taxes, and student loan payments. In addition, you can claim exemptions for some of your property, so that it does not need to be turned over to the bankruptcy court. There are exemptions under federal law, as well as exemptions under state law. You must choose one or the other, though, and cannot mix federal and state exemptions. In most instances, the exemption amount available is insufficient to allow you to keep a home.
- A Chapter 13 proceeding, known as a “debtor’s reorganization,” allows you to renegotiate/restructure your debt. In a Chapter 13 proceeding, you must prepare and submit a plan of reorganization for the approval of your creditors and the court. The plan typically sets forth the arrangements for paying your arrearages off over a three-to-fiveyear period. With a Chapter 13, you don’t have to relinquish any property. You must, however, honor the terms of the reorganization plan or your creditors may ask the court to terminate the bankruptcy and suspend the automatic stay.
Contact the Experienced Personal Bankruptcy Attorneys at Bailey & Galyen
At the law office of Bailey & Galyen, we offer a free initial consultation to every client. For an appointment with an proven bankruptcy lawyer, contact us by e-mail or call our offices at one of the convenient locations listed below. We will take your call 24 hours a day, seven days a week.