Bankruptcy may be an option for Texas residents who have significant debt that they are unable to pay. One type of bankruptcy, Chapter 7, is the most frequently filed bankruptcy.
Chapter 7 bankruptcy is known as a liquidation bankruptcy because it uses the proceeds from the sale of secured property to pay back creditors. Compared to a Chapter 13 bankruptcy, which takes three to five years to complete, a Chapter 7 bankruptcy can be discharged in just three to six months. For people who may be in need of a new vehicle, the majority of lenders or banks will not sell or lease a vehicle to Chapter 7 filers until after their bankruptcy has been discharged.
Debtors should carefully consider their financial situation when determining whether a Chapter 7 bankruptcy is the best solution. Debtors who have little or no assets, are not employed or have a lower income may reap the most benefits from a Chapter 7 bankruptcy. It is important to note that the filing of the bankruptcy will remain on credit reports for up to a decade from the file date. Filing for Chapter 7 will also lower a debtor’s credit score.
A means test has to be conducted in order to qualify for a Chapter 7 bankruptcy. The test is designed to determine if the debtor’s income is low enough to file for this particular type of bankruptcy. In order for debtors to qualify, their household income has to be less than their state’s median income for a family of the same size.
An attorney who practices bankruptcy law may evaluate the financial situation of a client and advise whether a Chapter 7 bankruptcy may be an option. The attorney may explain the bankruptcy process and which debts may be discharged as well as assist with completing the necessary forms.