There are many things in life that can cause a person stress, but there are few things in modern life that can create consistent and oppressive stress like financial troubles. Whether it is caused by medical debts due to a sudden health concern, the loss of a job or many other factors, significant amounts of debt and the issues that accompany it can strain every aspect of a person’s life.
Fortunately for many people, there are ways to deal with their debts in a constructive way. Although it should never be the first option, declaring chapter 7 bankruptcy can provide people with relief from calls and harassment from debt collectors, foreclosures, etc. However, it is important to understand what chapter 7 bankruptcy really entails.
Chapter 7 bankruptcy
There are several forms of bankruptcy and, depending on your situation, one may be more beneficial than others. Once a person has decided to declare bankruptcy, chapter 7 bankruptcy is often the first option because it can provide people with “a fresh start” by eliminating or discharging many types of debts.
If you file for chapter 7 bankruptcy, a trustee with collect all of your non-exempt assets, sells those assets then gives the funds to your debtors to cover as much of your debts as possible. However, you can only file for chapter 7 bankruptcy if you pass what is known as the “means test.”
The Texas means test
The goal if the means test to is determine whether or not your debts should be eliminated (chapter 7 bankruptcy) or if they should be managed and paid off over time with a repayment plan (chapter 13 bankruptcy).
If your average annual household income is lower than the median income for Texas household of your size, you will not have to worry about the means test. If it is over the median income for Texas households of your size, you have to figure out if your total monthly income over the next 60 months will be less than $7,475. If it will be less than $7,475, you can file for chapter 7 bankruptcy. If it is more, you will have to figure out another solution.
Even though the “fresh start” of chapter 7 bankruptcy can sound like a life-saver for people suffering from significant amounts of debt, it is important to know that certain types of debt cannot be discharged by bankruptcy. Some non-dischargeable debts include,
- Student loans (unless they can be proven to cause undue hardship)
- Child support
- Some recent debts (usually within the last 3 years)
Because of the many factors involved in chapter 7 bankruptcy, the process can become very complicated, very quickly. If you are seriously considering filing for bankruptcy, it is highly recommended that you seek out the services of an experienced and knowledgeable legal professional. They will be able to guide you through the legal process while making sure your best interests are the highest priority.