These are financially challenging times for millions of Americans. The COVID-19 pandemic has caused many people to leave their jobs, be laid off, and incur exorbitant medical bills. All of these factors can have a devastating impact on individuals and families.
If you are one of the many people considering debt relief options, you may decide to speak with a debt defense lawyer in Texas about bankruptcy. As you consider whether bankruptcy is right for you, it is important to ask questions so you know what to expect.
Bankruptcy in Texas: Questions to Ask your Lawyer
Here are our recommendations for questions to ask about bankruptcy in Texas.
What is Bankruptcy?
Bankruptcy is a legal proceeding for individuals or businesses that cannot pay off debt. All bankruptcy cases are handled in federal court and abide by federal law. When you complete the bankruptcy process, you get a fresh start on your finances.
Are There Different Types of Bankruptcy?
Yes. There are four types of bankruptcy, and which type you file will depend on your situation. An overview of the types of bankruptcy is as follows:
- Chapter 7: Chapter 7 requires debtors to liquidate (sell, etc.) certain assets in order to pay their debts. Once all applicable debts are paid, or payments are made, the remainder to the debt will be discharged. Be aware that certain debts like student loans and alimony cannot be discharged.
- Chapter 11: Chapter 11 is a type of bankruptcy most often used by businesses. This type of bankruptcy reorganizes assets and debts so that businesses can get ahead.
- Chapter 12: Chapter 12 is a type of bankruptcy that is only available to family farmers.
- Chapter 13: Chapter 13 is a type of “debt adjustment”. Under this chapter, the debtor files a plan to pay back debts (or as much as possible) based on their current income.
Does Filing Bankruptcy Stop Debt Collectors?
Yes. When you file bankruptcy, creditors must immediately stop attempting to collect a debt. They cannot call, email, or send you letters. They cannot contact your friends and family either. If they do attempt to contact you, they must go through your lawyer.
What is the Means Test?
Everyone who files for Chapter 7 or Chapter 13 bankruptcy (the most common types of bankruptcy) must take a “means test”. This test is a screening tool that determines if you qualify for Chapter 7 or Chapter 13. It uses a formula to determine your assets and debts, and your ability to resolve debt.
How will Chapter 7 Bankruptcy Affect my Credit?
A Chapter 7 bankruptcy can stay on your credit for up to 10 years. This is concerning for many people, but the benefits of completing bankruptcy can outweigh any damage the bankruptcy causes to your credit score. Often, people who file bankruptcy will see their credit score begin to rebound very quickly after completing the process.
What are the Benefits of Completing Bankruptcy?
There are many benefits to completing bankruptcy if you are struggling financially. Some of those benefits include:
- Stopping foreclosure on your home
- Stopping repossession of your car
- Putting a stop to debt collectors
- Restoring or preventing termination of utilities
- Restoring your driver’s license if it was suspended due to failure to pay court-ordered payments.
- Eliminating the legal obligation for most of your debts.
What Does Bankruptcy NOT do?
There are some debts and financial burdens that bankruptcy cannot help you eliminate. These include:
- Discharging past-due alimony, child support, IRS debt, or student loans
- Protecting you from criminal charges
- Waiving criminal fines, fees, or penalties
- Discharging debts that arise after bankruptcy filing
- Eliminating the obligation of a co-signer on loans
Learn More from a Bankruptcy Lawyer in Texas
Thank you for reading Bankruptcy in Texas: Questions to Ask Your Lawyer. If you still have questions about bankruptcy in Texas or whether you qualify, contact Daic Law. Our bankruptcy lawyer in Texas can help you explore your options for debt relief, including bankruptcy. We can also help you with debt defense, including defending you against debt collection lawsuits.