Once you have made the difficult decision to file for bankruptcy, you will have to decide which type of bankruptcy you should file. Most individuals will choose between Chapter 7 and Chapter 13 bankruptcy. While the general idea is the same (to eliminate debt), each type of bankruptcy comes with its own pros and cons.
People with minimal assets and/or below-average incomes in their state should qualify for Chapter 7 bankruptcy. Chapter 7 bankruptcy is useful in that it allows people who cannot pay back their debt to eliminate it by getting rid of their non-exempt property to pay off creditors. The process will only take a few months and you may even be able to keep some property if it qualifies as exempt. However, keep in mind that a Chapter 7 bankruptcy will be on your credit reports for up to 10 years after your filing date, thereby affecting your ability to apply for credit and acquire loans.
Chapter 13 bankruptcy is generally better suited for people who earn too much income to qualify for Chapter 7 bankruptcy or people who could pay off their debts if they had more time. Generally, a Chapter 13 bankruptcy allows you to set up a repayment plan to pay back most of your debt and make monthly payments to your bankruptcy trustee. The trustee will use your payments to pay back your creditors until the payment plan is finished. Qualifying for a Chapter 13 bankruptcy requires you to have unsecured debt of less than $394,725 or secured debt of less than $1,184,200, as well as a steady income.
Deciding which type of bankruptcy is better for you and your family can be challenging. A qualified bankruptcy attorney in Texas can help you make this critical decision and get you on the path to financial security.