When a person or business in Texas cannot pay debt, bankruptcy may be an option. This process allows for some or all debts to be discharged either through liquidation or through a repayment plan. Those who file for Chapter 7 bankruptcy will use the money obtained after selling non-exempt assets to pay off creditors. Debtors will likely need to take a means test to determine if they can afford to pay off some of their debts.
If the answer to that question is yes, that debtor will usually be required to file for Chapter 13 bankruptcy. Chapter 13 bankruptcy involves a payment plan that last for three or five years. Depending on how much debt a person has, he or she could be eligible for Chapter 11 bankruptcy. However, this is usually reserved for corporate entities that want to reorganize their debts.
There are many different reasons why a person may file for bankruptcy. For instance, a person could have lost a job, have student loan debt or be dealing with a large medical bill. In some cases, an individual may be dealing with all three at the same time. By opting for bankruptcy, debtors start the process of rebuilding their credit and reduce the stress of not being able to pay their existing debt.
Filing for bankruptcy may help an individual reduce his or her debt load while retaining important pieces of property. In some cases, a debtor may be allowed to keep equity in a home or other asset. Furthermore, creditors are generally not allowed to pursue a foreclosure or repossession while a bankruptcy case is ongoing. An attorney may explain more about how to file for bankruptcy and the requirements to do so.