What Is a Chapter 7 Filing? What Are the Benefits? What Are the Limitations?
Something unexpected has happened in your life. You’ve been in an accident or you have a serious illness, making it impossible for you to work. Your employer has been so affected by COVID that you’ve lost your job. Your spouse has filed for divorce. Now what?
If you’re like most Americans, any one of these unanticipated events can put you behind the 8-ball, where you can’t keep up with your financial commitments. These are the types of circumstances, though, that the American bankruptcy laws were intended to address. When seeking personal protection through bankruptcy, there are generally two different paths—a Chapter 7 liquidation and a Chapter 13 reorganization. In this blog, we’ll take a closer look at how a Chapter 7 works, as well as the benefits and limitations of such a filing.
What Is a Chapter 7 Bankruptcy Filing?
In a Chapter 7 petition, also known as a liquidation proceeding, you have the opportunity to discharge (permanently rid yourself of) certain debts. In exchange, however, you must turn over some of your assets to the bankruptcy court, to be used to provide some compensation to your creditors. The important things to know about a Chapter 7 are:
- You must qualify to discharge debts by submitting to a “means test,” whereby you provide financial information to determine whether you have the resources to repay your creditors over a 3-to-5-year period. If you don’t qualify, your only option in bankruptcy is through Chapter 13.
- Some debts, such as family law obligations (child support), cannot be discharged in Chapter 7. Others, such as student loan payments and most tax arrearages, can be extremely difficult to discharge.
- You can claim some of your assets as exempt from the bankruptcy estate, so you won’t have to relinquish them to the court. The Texas state exemptions are very generous, so it’s only in rare situations where you’ll have to give up personal assets.
- Immediately upon filing, you’ll be entitled to the protection of the automatic stay, which prohibits creditors from calling, writing or taking any legal action outside of the bankruptcy proceedings to collect a debt
Contact an Experienced Rockwall, TX Bankruptcy Attorney
There’s no time like the new year to get a fresh financial start. At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
