There is some scary points when you’re considering filing bankruptcy. For home owners, it can be foreclosure. Some families may fear paying bills if wages are garnished. Some individuals may simply be sick of having impossible debts. While Chapter 13 bankruptcy is not your only solution – Chapter 7 having it’s own advantages – it can be quite effective in protecting your Texas home, your wages, and your rights.
The Automatic Stay Rules
The most important rule to understand in the automatic stay is how long it lasts. Typically, it buys you several months to several years. For Chapter 13 filers, the automatic stay lasts until one of these events occur: your bankruptcy case is closed, your case is dismissed, or when your debt discharge is granted or denied. Since a Chapter 13 filing takes 3-5 years, all collections must stop for this period.
Lawyer or No Lawyer
If you forgo hiring a lawyer, don’t expect an easy process. Simply having no legal experience does not influence how things such as the 341 meeting or court process work; if you have no idea what is happening, you’re out of luck. If mistakes are made, they will affect your case. Hiring a lawyer is crucial for a successful debt discharge.
Documents to Give
The laws can be complex in terms of what documents to file and when to. Your lawyer is best in these situations. You must have proof of your current income and debts, for example, not just going on your word. You will also have to go through the means test.
The Means Test
If you want to file Chapter 7 bankruptcy, you must still submit a means test. If you make too much money, you are ineligible for Chapter 7. In Chapter 13 bankruptcy, you are almost always eligible, unless you owe a high amount in secured and unsecured debts (monies owed in the hundreds of thousands).
If you have assets which are nonexempt, that means they you are responsible for paying your creditors fair market value. For example, you might own an expensive piece of jewelry. You need not lose it; you can pay the value of the jewelry if it had been liquidated in a Chapter 7 bankruptcy. This too can get complex, as your trustee is involved and ensuring the monies owed are paid as part of your debt repayment plan. Your lawyer is invaluable in helping you protect nonexempt assets.
Your Credit Rating
Usually a Chapter 13 bankruptcy means you will have a low credit rating. It will definitely affect it for the worse; typically you’ll be at 480. You will have to rebuild your credit. Given time, this is very possible. And if you freed up some funds by buying time to pay back debts, you will have opportunities to improve credit over time. Simply filing bankruptcy does not close all credit and loan options. You just might have to ask a good number of creditors for loans before getting a yes.