Texas consumers who are struggling with debt may already be aware of the protections conveyed by bankruptcy. Those who are considering filing a bankruptcy petition should take into account at least three considerations as they make their decisions. First, it’s important to be aware of the different types of bankruptcy available. Second, individuals should know about the cost of filing and other costs associated with the process. Finally, knowledge of the limitations of bankruptcy protection is important.
There are several different types of bankruptcy, the most common of which for individual filers are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is also referred to as liquidation bankruptcy, in that the filer’s non-exempt assets are liquidated to pay of his or her debts to the extent possible. Chapter 13 bankruptcy is also referred to as reorganization or wage earner’s bankruptcy. It involves the creation and approval of a three- or five-year plan whereby the filer will pay down debts to the extent possible.
The cost of filing a Chapter 7 petition is typically much lower than the cost of filing for Chapter 13. In addition to filing fees, those who file for bankruptcy may also be responsible for paying their attorneys’ fees or for required bankruptcy counseling.
Whether or not to file for bankruptcy often depends on the types of debt that are causing problems for the individual. Some types of debt, that is, are not dischargeable in bankruptcy. Students loans and tax debts are typically not dischargeable, nor are debts due to unpaid child support or alimony. Individuals who have questions about reducing or eliminating debt may want to speak with a lawyer to learn about the eligibility and other requirements associated with Chapter 7 and Chapter 13.