Say Goodbye to Debt: Everything You Need to Know About Chapter 13 Bankruptcy in Texas

Managing debt is an important aspect of personal finance. It can be overwhelming and stressful, especially if you have multiple debts with high interest rates. One option for managing debt is filing for bankruptcy. Chapter 13 bankruptcy is a type of bankruptcy that allows individuals to restructure their debt and create a repayment plan that fits their budget. In this article, we will discuss everything you need to know about Chapter 13 bankruptcy in Texas.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a legal process that allows individuals to restructure their debt and create a repayment plan that fits their budget. Unlike Chapter 7 bankruptcy, which liquidates assets to pay off creditors, Chapter 13 allows individuals to keep their assets and pay off their debt over a period of three to five years.

Eligibility requirements for Chapter 13 include having a regular income and secured debts that are less than $1,257,850 and unsecured debts that are less than $419,275. Individuals who do not meet these requirements may need to file for Chapter 7 bankruptcy or explore other debt relief options.

How Chapter 13 Bankruptcy Works

Filing for Chapter 13 bankruptcy involves submitting a petition to the bankruptcy court. Once the petition is approved, a repayment plan is created based on the individual’s income and expenses. The repayment plan typically lasts for three to five years and requires regular payments to the bankruptcy trustee, who then distributes the funds to creditors.

The automatic stay is another important aspect of Chapter 13 bankruptcy. It is a court order that stops creditors from taking any collection actions, such as wage garnishment or repossession, during the bankruptcy process.

Advantages of Chapter 13 Bankruptcy

Chapter 13 bankruptcy has several advantages for individuals who are struggling with debt.

• One of the main advantages is protection from creditors. The automatic stay provides immediate relief from collection actions, which can allow individuals to focus on creating a repayment plan without the stress of constant collection calls.
• Another advantage of Chapter 13 is the ability to keep assets. Unlike Chapter 7 bankruptcy, which requires the liquidation of assets to pay off creditors, Chapter 13 allows individuals to keep their assets and pay off their debt over time.
• The repayment plan created in Chapter 13 bankruptcy is also a major advantage. It is designed to fit the individual’s budget, which can provide a sense of relief and control over their finances.
• Additionally, certain debts, such as medical bills and credit card debt, may be discharged at the end of the repayment period.

Disadvantages of Chapter 13 Bankruptcy

While Chapter 13 bankruptcy has several advantages, there are also some disadvantages to consider.

• One of the main disadvantages is the long-term commitment. The repayment plan lasts for three to five years, which can be a significant amount of time for individuals who are already struggling with debt.
• Another disadvantage is the negative impact on credit score. Filing for bankruptcy can lower credit score and make it more difficult to obtain credit in the future. However, many individuals who file for Chapter 13 bankruptcy already have low credit scores, and the bankruptcy process can provide a fresh start for rebuilding credit.
• Strict budgeting requirements are also a disadvantage of Chapter 13 bankruptcy. The repayment plan requires regular payments to the bankruptcy trustee, which can be challenging for individuals who are already struggling to make ends meet.

How to File for Chapter 13 Bankruptcy in Texas

Filing for Chapter 13 bankruptcy in Texas involves several steps. The first step is to complete credit counseling, which is required by law before filing for bankruptcy. The next step is to complete the bankruptcy forms and submit them to the bankruptcy court.

In Texas, bankruptcy forms can be submitted electronically or in person at one of the four bankruptcy courts located in Houston, San Antonio, Austin, and Dallas. It is important to work with an experienced bankruptcy attorney to ensure that all forms are completed accurately and submitted on time.

Frequently Asked Questions about Chapter 13 Bankruptcy in Texas

1. Can I keep my home and car if I file for Chapter 13?
   Yes, individuals can keep their home and car in Chapter 13 bankruptcy as long as they continue to make regular payments on their secured debt.
2. Will my employer find out if I file for bankruptcy?
   While bankruptcy is a public record, it is unlikely that an employer would find out unless the individual works in the financial industry or is required to disclose bankruptcy as part of their employment contract.
3. How long does Chapter 13 bankruptcy take?
   The repayment plan in Chapter 13 bankruptcy typically lasts for three to five years, depending on the individual’s income and expenses.

Conclusion

Chapter 13 bankruptcy is a viable option for individuals who are struggling with debt in Texas. It allows individuals to create a repayment plan that fits their budget while protecting their assets and providing relief from collection actions. However, it is important to seek professional advice before making a decision and to remember that managing debt is an ongoing process.

FAQ

Q1. What is Chapter 13 Bankruptcy in Texas?

A1. Chapter 13 bankruptcy is a type of bankruptcy that allows individuals with regular income to reorganize their debts and create a payment plan to repay their creditors over a period of three to five years.

Q2. Who is eligible for Chapter 13 Bankruptcy in Texas?

A2. Any individual who has a regular income and owes less than $1,257,850 in secured debt and less than $419,275 in unsecured debt is eligible for Chapter 13 bankruptcy in Texas.

Q3. How does Chapter 13 Bankruptcy in Texas differ from Chapter 7 Bankruptcy?

A3. Chapter 13 bankruptcy is a reorganization of debts that allows individuals to keep their property and pay back their creditors over a period of time, while Chapter 7 bankruptcy is a liquidation of assets that allows individuals to discharge their debts without paying them back.

Q4. How long does a Chapter 13 Bankruptcy in Texas last?

A4. A Chapter 13 bankruptcy in Texas lasts for three to five years, depending on the repayment plan that is agreed upon by the debtor and the creditors.

Q5. What debts can be included in a Chapter 13 Bankruptcy in Texas?

A5. Most debts can be included in a Chapter 13 bankruptcy in Texas, including credit card debt, medical bills, personal loans, and tax debts.

Q6. Can I keep my home and car if I file for Chapter 13 Bankruptcy in Texas?

A6. Yes, you can keep your home and car if you file for Chapter 13 bankruptcy in Texas, as long as you continue to make your payments on time.

Q7. Will filing for Chapter 13 Bankruptcy in Texas affect my credit score?

A7. Yes, filing for Chapter 13 bankruptcy in Texas will affect your credit score, but the impact will be less severe than filing for Chapter 7 bankruptcy.

Q8. Can I file for Chapter 13 Bankruptcy in Texas if I have filed for bankruptcy before?

A8. Yes, you can file for Chapter 13 bankruptcy in Texas if you have filed for bankruptcy before, as long as the previous bankruptcy was not a Chapter 13 bankruptcy within the past two years or a Chapter 7 bankruptcy within the past four years.

Q9. Do I need an attorney to file for Chapter 13 Bankruptcy in Texas?

A9. It is highly recommended that you hire an experienced bankruptcy attorney to help you file for Chapter 13 bankruptcy in Texas, as the process can be complex and confusing.

Q10. What happens after I complete my Chapter 13 Bankruptcy in Texas?

A10. After you complete your Chapter 13 bankruptcy in Texas, your remaining unsecured debts will be discharged, and you will no longer be responsible for paying them. You will also be able to start rebuilding your credit and moving forward with your financial life.

Glossary

1. Chapter 13 bankruptcy: A type of bankruptcy that allows debtors to reorganize their debts and create a repayment plan over a period of three to five years.
2. Trustee: A court-appointed individual responsible for administering a debtor’s Chapter 13 bankruptcy case.
3. Debtor: An individual or entity that owes money to creditors.
4. Creditor: An individual or entity that is owed money by a debtor.
5. Automatic stay: A court order that prevents creditors from taking collection actions against a debtor during a bankruptcy case.
6. Plan confirmation: The process by which a debtor’s Chapter 13 repayment plan is approved by the court.
7. Disposable income: The amount of income a debtor has left over after necessary expenses are paid.
8. Priority debts: Debts that are given priority in a Chapter 13 repayment plan, such as taxes and child support.
9. Secured debts: Debts that are backed by collateral, such as a mortgage or car loan.
10. Unsecured debts: Debts that are not backed by collateral, such as credit card debt or medical bills.
11. Means test: A calculation used to determine whether a debtor is eligible for Chapter 7 or Chapter 13 bankruptcy.
12. Exemptions: Assets that are protected from creditors during bankruptcy proceedings.
13. Discharge: The release of a debtor from the obligation to repay certain debts.
14. Reaffirmation agreement: An agreement between a debtor and creditor to continue paying a debt after bankruptcy.
15. Adversary proceeding: A lawsuit filed within a bankruptcy case, typically involving disputes over debts or assets.
16. Chapter 7 bankruptcy: A type of bankruptcy that involves liquidation of a debtor’s assets to repay creditors.
17. Credit counseling: A requirement for individuals filing for bankruptcy to receive counseling from an approved agency.
18. Bankruptcy petition: The formal document filed with the court to initiate a bankruptcy case.
19. Bankruptcy estate: The property and assets that are subject to administration in a bankruptcy case.
20. Dismissal: The termination of a bankruptcy case without a discharge of debts.
21. Unsecured creditors: Unsecured creditors refer to individuals or entities that have lent money to a borrower without any collateral or security. In the event of default or bankruptcy, unsecured creditors have a lower priority in receiving payment compared to secured creditors who have a claim on specific assets.