Debtors in Texas and throughout the nation could use bankruptcy as a way to obtain financial relief. However, it should generally be used as a final option when there are no other ways to repay balances owed to creditors. It is important to note that bankruptcy does not eliminate every type of debt that a person could have. For instance, it generally won’t take care of taxes owed or back child support payments.
Chapter 7 and Chapter 13 bankruptcy are the two most common types an individual can file for. A Chapter 7 case makes it easier to get rid of eligible debts faster while Chapter 13 cases involve a debtor making payments over a course of several years. Filing for bankruptcy can have an adverse impact on a person’s credit score regardless of what type of protection a person seeks.
The extent to which a person’s credit could be hurt by filing for bankruptcy depends on his or her credit score prior to filing. Individuals with good credit will likely fare worse than individuals who have low scores prior to filing. Generally, a bankruptcy will be on a person’s credit report for seven years to a decade. Ideally, a person will learn how to budget, live on less of their income and take other steps to avoid going into debt once again.
Filing for bankruptcy can come with a variety of benefits for a debtor. For instance, doing so could put a stop to creditor contact or put a stop to a planned lawsuit. Debtors may also benefit from having debts reduced or eliminated in a timely manner. Even if a person is required to make payments, those payments may be significantly lower than what was paid out prior to asking for protection from creditors.