We hear many questions when it comes to bankruptcy. One common question is: can I save money during bankruptcy? By saving money, for this blog post we mean the literal term, not saving on expenses but actually putting money into your bank account.
In Chapter 7 bankruptcy, saving money is less of an issue. You are discharging your debts and losing assets. In Chapter 13 bankruptcy, however, you are supposed to pay all extra money to your bankruptcy trustee.
Really, that doesn’t sound fair. Of course, you do have to follow the laws – you can’t just ignore them. But it’s not unreasonable to save some money for other expenses.
A Chapter 13 bankruptcy takes 3-5 years, much longer than a Chapter 7 bankruptcy which only takes a few months. If you cannot save money for that long, it will be hard to actually get that fresh start. But look at the advantages of Chapter 13. For Texans, it can save your home from foreclosure. It can stop a car repossession or the taking of other assets. If you owe $100,000 in debt, you can quite often pay a fraction of that over a long period and come out free of most debts.
The problem with saving money during bankruptcy is you’re supposed to be broke. Your supposed to have little if any money. That too is unrealistic. Quite often those who file Texas Chapter 13 bankruptcy do so not because they have no money, but because they don’t have the necessary income to pay off all debts. You might owe $100,000 on your home and fear foreclosure, owe $5,000 on your car, and owe thousands more in medical and credit card debt. You also have a job which pays enough for you to avoid Chapter 7. In this case, saving money is necessary.
If you come into new debts you know you cannot afford, you can suspend your Chapter 13 debt repayment plan in order to pay off these debts. You might experience damages to your home or car which you must fix, and that’s why the laws are like this.
Can you save money in Texas bankruptcy? If you have disposable income, it may be difficult. At this point, you need to talk to an experienced Texas bankruptcy attorney. If you’re unsure of any laws, an attorney is your best source for information. Also, when you need to suspend payments on your Chapter 13 bankruptcy, it’s your attorney’s job to help with this.
If you have no attorney yet, many offer free consultations.
