Why File For Bankruptcy:
Bankruptcy is often a necessary choice for those who find themselves over their head in debt. Bankruptcy can provide you with a fresh start. Generally, at the end of a personal bankruptcy, all of our client’s unpaid, unsecured debts are discharged. That means that, in most cases, our clients are relieved from paying all or many of their debts related to credit card, medical bills, repossessions, personal loans and payday loans.
For many clients, however, the issue is not just an abundance of credit card or medical debt. In many cases, clients are faced with losing their vehicle or home. Bankruptcy can provide relief for people facing repossession or foreclosure and a way to keep their vehicle or home even though they are behind on their payments.
It is not just individuals though that can benefit from a bankruptcy. Businesses too have the opportunity to file bankruptcy. A commercial bankruptcy can provide a business with a manageable way to deal with its debt. If a business files for bankruptcy, it can restructure the repayment of its debt in a way that will allow it to continue operating. This is often a viable and effective alternative to closing.
Below you will find some common bankruptcy terms and frequently asked questions. While these may answer some of your questions, you will likely have many more. To get answers to those questions and to learn more about the benefits and procedures of bankruptcy, please contact Lindsay, Lindsay & Parsons for a free consultation.
Kinds of Bankruptcy:
A chapter 7 bankruptcy is designed for people that make under the Texas annual median income and that are current on their secured debts. A chapter 7 typically lasts no more than 180 days. At the end of an individual’s successful chapter 7, all the debtor’s unsecured, non-priority debts are discharged. This means that the debtor is no longer personally responsible for these debts. Such unsecured, non-priority debts includes medical bills, credit card debt, repossession deficiencies, payday loans and other unsecured loans.
An chapter 13 bankruptcy is designed for people that make over the Texas annual median income, that are behind on a secured debt that they want to keep, or that have non-exempt assets that they want to keep. A chapter 13 can also be utilized by an unincorporated business as a way to manage its debts. A chapter 13 bankruptcy lasts for 3 to 5 years depending on whether or not the debtor makes over the annual median income. During this 3 or 5 year period, a debtor makes monthly plan payments to a trustee to repay some or all of his or her debts. A chapter 13 can be of great benefit for debtors who are in danger of losing their home.
A chapter 11 bankruptcy is generally used to reorganize a business although it can be utilized by individuals with significant assets or income as well. A chapter 11 requires the debtor to create a plan of reorganization to repay all or some of its debts.
A chapter 12 bankruptcy is designed to assist family farmers or family fisherman with regular monthly income.
Common Bankruptcy Terms:
Creditors’ Meeting or 341(a) Meeting:
This meeting is held by the trustee normally about 30 days from the date you file your bankruptcy. The purpose of the meeting is to allow the trustee and any creditors who wish to attend to examine the debtor under oath.
An individual debtor who receives a discharge in bankruptcy is relieved of personal liability for certain types of debt. Once the debtor received a discharge, creditors are prohibited from seeking to collect a debt on those to which the discharge applies.
The bankruptcy code allows a debtor to exempt a number of assets including a home, a car for each licensed driver and many personal belongings. Any assets that are found to be exempt are protected from seizure by the trustee. In many cases, all the debtor’s assets are exemptible.
In Texas, the annual median income for a single person as of March 15, 2011 if $38,294. For 2 people, it is $55,178. For a family of 3, it is $56,445. For a family of 4 it is $65, 477. For each individual in excess of 4, you add $7,500. Note that these figures change periodically and may vary from the figures indicated here. The median income is a basis on which to determine whether an individual will qualify for a chapter 7 bankruptcy. Note, however, that this is just a starting point. You are not necessarily prohibited from filing a chapter 7 just because your household monthly income exceeds the median income level.
Secured debts are those that are supported by collateral, meaning that, if you do not pay on that debt, the creditor has a right to repossess that collateral. Some examples of this are a house secured by a mortgage and a car secured by a vehicle loan.
The trustee’s duty is to administer the bankruptcy estate. This duty includes liquidating any of the debtor’s non-exempt assets and presiding over the creditor’s meeting.
Unsecured debts are those debts that are not supported by collateral. Examples of such debts are credit cards, medical bills, deficiencies from repossessions, and payday loans.
Frequently Asked Questions:
Can I keep my house?
Yes, the bankruptcy code allows you to keep your house as long as you continue to pay for it.
Can I keep my vehicle?
Yes, the bankruptcy code allows for each person of legal driving age to keep one vehicle. Again, you must continue to pay your vehicle loan if you want to keep the vehicle; however, in a chapter 13 bankruptcy there are some instances where you can reduce the amount you owe as well as the interest rate.
Can I keep my 401K or other retirement vehicle?
Yes, the bankruptcy code protects most retirement accounts from the reach of creditors.
Can I discharge back federal taxes?
In some cases, you can discharge back taxes. Whether or not back taxes can be discharged depends on when the taxes were assessed.
Can I discharge student loans?
In some cases, you can discharge student loans. Whether or not student loans can be discharged depends upon whether or not you can prove to the court that repayment would constitute an undue hardship on the debtor.
Can I discharge back child support?
No, child support is not dischargeable.
Can I discharge a judgment taken against me?
In most cases, you can discharge a judgment taken against you. There are some exceptions, however, such as judgments for death or personal injury arising from a debtor’s operation of a motor vehicle while intoxicated.
Does my spouse have to file with me?
No, your spouse does not have to file with you; however, in many cases filing together will be advantageous. If you have incurred any debt jointly but only one spouse receives a discharge in bankruptcy, the other spouse will still be liable on the debt.
What do I need to bring to my free consultation?
The free consultation is mostly informative, so you do not necessarily need to bring any documentation with you at that time. We will discuss the benefits and procedures of the different chapters of bankruptcy and your specific financial situation to determine whether or not bankruptcy is right for you, and, if so, what chapter. It is always a good idea to come into the meeting having a rough idea of your total debt as well as your monthly pre-tax household income.
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