Once a person in Texas who is struggling financially makes the decision to deal with those financial challenges by considering bankruptcy, it can be confusing deciding which option is the right one. Those who are thinking about filing for Chapter 7 need to be fully aware of the alternatives that are available and how they might or might not be preferable.
An example in which it might not be best to file for Chapter 7 is when the debtor has a business and would like to continue operating that business and steer clear of a liquidation that often accompanies other forms of bankruptcy. That type of debtor might be better off with a Chapter 11. With Chapter 11, the debtor can have the debts adjusted by reducing them or having an extension of the amount of time that is allowed for the debts to be repaid. There could also be a comprehensive reorganization of the debts. For those with a sole proprietorship, Chapter 13 might be better than a Chapter 11 or Chapter 7.
With Chapter 13, debtors are able to have the chance to retain their homes and not have them foreclosed upon as they can catch up on their payments through a payment plan. A Chapter 7 might be subject to a dismissal if the debts are consumer based and not business based. With consumer debts, this can be seen by the court as an abuse of the Chapter 7 laws. There will be a means test based on the debtor’s current monthly income and median wages in the state to determine whether abuse is taking place. With the court finding that there was an attempt at abusing the Chapter 7 laws, the case might be converted to Chapter 13 or dismissed. The conversion to Chapter 13 will be done with the consent of the debtor.
For many, Chapter 7 bankruptcy is the way to go. However, it is not the best possible choice in all situations. Those who are considering Chapter 7 bankruptcy must be fully aware of the laws regarding the filing and if they qualify. There are also other chapters available that might be more suited to the individual situation. When making the decision to file for bankruptcy, speaking to an experienced legal professional is an imperative before moving forward.
Source: uscourts.gov, “Chapter 7 — Bankruptcy Basics — Alternatives to Chapter 7,” accessed on April 5, 2016