When Texans are facing overwhelming debt, they are frequently unaware of what to do next. Many might be reluctant to consider personal bankruptcy. There are common misconceptions about the process. It is imperative to know that it can be a useful strategy to clear debt and start over.
Chapter 7 bankruptcy is a liquidation bankruptcy. There are key points to understand before deciding to file for Chapter 7. The assets and income are foundational parts of the process. If a person owes around $25,000 with an income leaving them in the middle class, it can be difficult to catch up and pay that debt. Bankruptcy could be beneficial for individuals who face these circumstances.
Some might consider a debt settlement to try and negotiate a reduced amount. That can be risky as the settlement often tilts toward the creditor, and there are limited benefits for the debtor. Creditors might not want to settle the debt at all. Those who negotiate without professional help might make errors to worsen the situation. It is also important to remember that a debt settlement with forgiven debt means it will be counted as taxable income and there could be a substantial tax bill.
People who meet the requirements for Chapter 7 with their income, property and debt should know that this will eliminate most or all of what they owe. For those concerned about their credit being ruined by a Chapter 7 filing, people can successfully rebuild their credit after their case is complete. Certain debts cannot be discharged in Chapter 7. That includes alimony, child support and student loans. However, many debts can be eliminated. When considering the alternatives to get out of debt, it may be useful to discuss the case with an experienced Chapter 7 bankruptcy attorney.