Important Information about Bankruptcy

While some people may view bankruptcy as an excuse for people to shirk their financial responsibilities and run away from obligations they have made to creditors, the truth is that bankruptcy can help persons who are facing serious financial difficulty keep valuable assets and regain solid standing in society.

Persons who are struggling to make regular payments to their creditors may face seriously negative actions including foreclosure, repossession, and severely damaged credit. Financial burdens can put undue stress on individuals and their families and can affect every facet of daily life. The Austin bankruptcy lawyers of Slater, Kennon, & Jameson, LLP are happy to bring you the following information on bankruptcy to help explain your legal options if you are facing a dire financial situation.

What Type of Bankruptcy am I Eligible For?

While many people are aware that there are different types of bankruptcy options available to those who are struggling to repay important debts, individuals often do not know which type of bankruptcy is right for their specific situation. While businesses may face financial troubles and may file for Chapter 11 bankruptcy, most individual debtors will choose between Chapter 7 and Chapter 13 bankruptcy.

An easy way to separate the two types of bankruptcy is that the applicant will typically undergo reorganization of debts or the liquidation of assets in order to satisfy his or her creditors. People may not be able to freely choose which type of bankruptcy they wish to apply for, since there are criteria that applicants must meet in order to qualify for Chapter 7 and Chapter 13, including:

• Persons with an income that is over the median level for their state may not be able to file for Chapter 7
• Disposable income is taken into account, and applicants who are able to pay a certain amount toward their debts over a five year period may not be able to file for Chapter 7
• Chapter 13 bankruptcy typically excludes people who have secured debts of over $1,010,650 and unsecured debts of more than $336,900

It is also important to take into account what the individual is trying to achieve during bankruptcy. Persons who are looking to prevent foreclosure and keep their homes, cars, and other assets may wish to file for Chapter 13 bankruptcy and not Chapter 7, which may require the liquidation of important assets to repay creditors.

Liquidation or Reorganization?

For some people, it is essential that they be able to hold on to important assets and negotiate a way to repay their debts without losing their home, vehicles, and other items. Other people simply would like a fresh start without the troubles of overwhelming debt, and they are willing to submit some items for liquidation to partly repay their creditors.

Chapter 7 bankruptcy typically involves the discharge of certain debts so that the applicant will no longer be held responsible for making regular payments. A court ordered “automatic stay” will notify creditors that the individual has filed for bankruptcy and will immediately stop companies from attempting to collect on the debt. Debts that are usually forgiven include credit card debt, personal loans, and other lines of credit that the individual cannot keep up with. There are certain debts that cannot be forgiven through Chapter 7 bankruptcy, including tax liabilities, student loans, alimony, and child support.

Chapter 13 bankruptcy allows the applicant to propose a repayment plan to satisfy debts and repay creditors under negotiated terms. The bankruptcy court will typically analyze the individual's income, types of debt, and how much the person can reasonably be expected to repay. Unlike Chapter 7 that allows only some property to be exempt from the bankruptcy proceedings, Chapter 13 bankruptcy typically provides protection for all of the individual's assets and depends on the person's income for repayment.

If you or someone you love is considering filing for bankruptcy, an Austin bankruptcy lawyer of Slater, Kennon & Jameson, LLP may be able to help explain the process and your legal options. For more information, contact us at 512-338-1100 today.