Pursuing Reorganization Rather than Discharge of Debt
When you’re considering seeking protection under the American bankruptcy laws, a Chapter 7 petition may seem like the best way to go. After all, you’ll get to totally wipe the slate clean on your debts, right? Isn’t that what you really want?
Not necessarily. While fully discharging your debts may seem like a no-brainer, there can be certain downsides to filing a Chapter 7 liquidation. Furthermore, you may not qualify to discharge your debts.
The “Means Test” in Bankruptcy
Before 2005, you could choose to file either a Chapter 7 or a Chapter 13. Under the revisions to the bankruptcy laws enacted in 2005, you must now qualify to discharge your debts, essentially by showing that you lack the resources to repay creditors in a Chapter 13 proceeding. The bankruptcy court will take a look at your disposable income, compared to others in your state, and make a determination whether you qualify to file under Chapter 7. If not, you must go through Chapter 13.
Other Reasons You May Want to File under Chapter 13
You may opt for Chapter 13 for at least a couple reasons:
- You want to keep all your property—With a Chapter 7, you typically have to relinquish some assets in exchange for the discharge of debts, although, in Texas, you can generally keep most, if not all, of your property. With a Chapter 13, you don’t have to give up any assets. If you have a mortgage, for example, you can restructure payments without losing your home.
- Most of your debt is not dischargeable—As a general rule, child support and similar family law obligations cannot be discharged. Student loan debt and tax arrearages are typically difficult to discharge. If most of your debt is in these categories, a Chapter 7 won’t bring much benefit.
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.
