Should I File Chapter 7 or Chapter 13 Bankruptcy?
Many of our Houston area clients ask whether they should file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. To a lesser extent we get inquiries about Chapter 11, but most of our clients focus on Chapter 7 and Chapter 13.
Please call us to discuss the option that is best for you.
This article is only meant to shed a little light on the subject and should not be a substitute for valid legal advice.
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Chapter 7 Bankruptcy in Houston
Chapter 7 is the type of chapter that you may want to file if you just want to walk away from your debt.
Since the Bankruptcy Code was re-written in October of 2005, an individual must qualify for a Chapter 7. An individual must be at or under what is known as the median or average income based on the number of dependents in their household. To determine if you qualify we must look at the last 6 months of income.
An average individual has an exemption for most if not all of their personal belongings and home. As long as your property is at or under the exempted amounts you may keep it in a Chapter 7.
Chapter 13 Bankruptcy – Houston
Chapter 13 is the type of chapter that you may want to file if you have fallen behind on bills for property that you want to keep, such as a car or a home.
An individual can stop a creditor from repossessing a vehicle and from foreclosing on a home by filing a Chapter 13.
A Chapter 13 allows an individual to catch up what they have fallen behind on by repaying that debt over 3 to 5 years. Secured debts, such as a car or home would get priority repayment in a Chapter 13. All unsecured debt such as credit cards and medical bills may receive pennies on the dollar or be completely discharged / wiped out.
Some individuals are over the median or average income, based on the number of dependents in their household. These individuals will need to file a Chapter 13 to repay a portion of their debt over a 5 year plan. Keep in mind, most interest and penalties stop the minute you file.
The amount you repay depends on your disposable income once you meet your normal monthly expenses. You must also account for the amount of property that you may not have an exemption for. You must pay that amount into your Chapter 13 Plan over the course of your five years.
Your Next Step…
If you are trying to decide what bankruptcy option is right for you, then it’s probably time for you to give our law firm a call so that we can help find your best legal option.