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Bankruptcy and dischargeable debts

Texas residents considering filing for bankruptcy to handle their substantial debts should be aware that not every type of debt is eligible to be discharged. People should also understand the differences between the two types of bankruptcies they are most likely to file.

Chapter 7 and Chapter 13 bankruptcies can assist debtors in different ways. Whether a debtor opts to file for Chapter 7 or Chapter 13 bankruptcy, the bankruptcy is likely to remain on their credit report for as long a decade.

During a Chapter 7 bankruptcy, all of a debtor's nonexempt assets will be liquidated, and the resulting funds will be distributed to their creditors to apply to some of their debts. Assets that are not required to be exempt include those that are deemed necessary for the debtor's everyday life; these items include, up to a specific value, tools needed to perform their job and vehicles. Qualifying debts that remain will be discharged, and creditors will be required to cease attempting to collect on the debts.

Chapter 13 bankruptcy allows debtors to restructure their debts without immediately discharging them. The debtors can use a repayment plan to pay on their debts for a period of time. If there are any remaining debts, those debts may be discharged.

Some of the many types of debts that are eligible for both Chapter 7 and Chapter 13 bankruptcy include vehicle loans, personal loans, credit card debts, mortgages, medical bills, unpaid utility bills and unpaid rent. Even if the debt can be discharged, the assets used to secure the debts may have to be offered as collateral.

A bankruptcy attorney may advise debtors how Chapter 13 may help them find debt relief. Assistance may be provided for creating a repayment plan based on the debtor's income.

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