Bankruptcy Gives You a Fresh Start but May Not Eliminate All Your Debt
If you’ve lost your job because of the pandemic, or your medical bills have piled up, you may be considering filing for bankruptcy in order to get back on your feet. One common misperception is that bankruptcy will wipe out all your debt and let you start over again. While Chapter 7 does allow you to permanently discharge certain obligations, there are limits. Here’s an overview of what you can and cannot expect to achieve with a personal bankruptcy filing.
Chapter 7 Bankruptcy Petitions
With a Chapter 7 filing, you can permanently terminate any obligation to repay certain debts, but some debts are either specifically excluded from Chapter 7 or can be discharged only in rare circumstances. Child or spousal support obligations after divorce can never be eliminated in bankruptcy. Student loan payments and tax arrearages occasionally can be discharged, but the rules are complex and very few people qualify.
It’s also important to understand that Chapter 7 is not available to everyone. You must qualify todischarge debts under Chapter 7 by submitting to a “means test,” in which you provide financial information to the bankruptcy court. You’re eligible to permanently rid yourself of certain debts only if the court determines that you lack the means to repay your creditors over a three-to-five-year period. If you don’t qualify for Chapter 7, your only recourse is a Chapter 13 bankruptcy (also known as “debtor’s reorganization”), in which you must repay your creditors according to an agreed-upon and court-approved plan.
Also, when you obtain discharge of a debt secured by property, the discharge applies only to the debt. Any lien on the property remains, and your creditor can still exercise the lien if permitted by your agreement.
Contact an Experienced Rockwall, Texas, Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. I am currently communicating with clients by phone, text message, or videoconference. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
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