Individuals in Texas may be able to erase some or all of their debts by filing for bankruptcy. The two most common forms of bankruptcy are Chapter 7 and Chapter 13. A Chapter 7 proceeding is often referred to as a liquidation bankruptcy. To qualify for this type of protection, an individual must pass a means test that seeks to determine if he or she has the ability to repay creditors.
A Chapter 13 case is generally referred to as a wage earner’s plan. Debts are repaid over a period of three or five years, and any remaining unpaid balances are discharged at the end of the repayment period. Furthermore, debtors generally get to keep their property during this period. Anyone who files for bankruptcy may experience a variety of negative consequences. In some cases, debtors could see their credit scores fall up to 200 points after filing.
If a person files for Chapter 13 bankruptcy, it remains on that individual’s credit report for up to seven years. However, if a person files for Chapter 7 bankruptcy, it remains on a credit report for up to 10 years. As seeking protection from creditors can have a significant impact on an individual’s finances, it may be wise to look at other debt relief options first.
By filing for Chapter 13 bankruptcy, a person may be able to get mortgage, auto or other debts under control. In some cases, creditors may be willing to renegotiate the terms of a secured loan to make it easier for a debtor to make future payments. Other benefits of bankruptcy may include an automatic stay of unwanted creditor contact and a ban on other debt collection activities such as foreclosure. An attorney may help an individual file for protection from creditors.