If you file Chapter 7 bankruptcy in Texas, do you lose everything? The misconception is common because of the term used, "liquidation" in Chapter 7, where your assets are taken, technically, to pay on debts. You have far more options than you might think. This guide explains how you can keep your assets with a bankruptcy.
Unsecured Debts
Unsecured debts are the prime reason to file for Chapter 7 bankruptcy, including Texas - where foreclosures, unemployment, and debts are causing many problems. For bankruptcy filers, Chapter 7 can truly be a life changing event. While you cannot discharge all debts - including alimony, child support, taxes, and some others - you can discharge your main debts such as credit card and medical. Medical is the prime reason many file for help, because of how fast you can accumulate debt when lacking medical coverage.
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If you owe a lot of unsecured debts, Chapter 7 is smart. But if you owe a lot of secured debts, you may be worried about losing them. The word "liquidation" comes up again.
Secured Debts
According to the U.S. government, "Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted." This makes sense. If you could just file bankruptcy and be free of your mortgage, we all might do it. However, the U.S. government also offers an out. " Depending on individual circumstances," the government says, "if a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy."
So if you owe a lot of unsecured debts, but want to keep your home and car, you would want to reaffirm the debts, to set up a plan before you file for Chapter 7. This way, you can keep your home, car, and valuable assets. Assets you feel you do not need and therefore don't pay on have the potential of being taken.
The Chapter 13 Option
Chapter 13 bankruptcy is another option, noted by the U.S. government as smart if you're worried about foreclosures. Foreclosures are a growing problem, though Texas residents have been hit less than other states like California (Texas has about 1 in 750 homes going into foreclosure every month, good compared to about 1 in 200 being lost in California every month).Chapter 7 bankruptcy cannot help if you have no way of paying the mortgage - only in that you can discharge the debt and come out clean. Oddly, if you discharge the debt with Chapter 7, you can stay in the home rent-free for several months. If you have the income to pay on the home, or if your income is too high for Chapter 7, Chapter 13 is the best protection from foreclosure.
Getting Legal Help
If you're unsure, if you're scared, it's time to speak with some experts. Hire an experienced Texas bankruptcy lawyer today. He or she can explain how you can reaffirm debts, whether Chapter 7 or Chapter 13 is better for you, and help protect your property and assets.
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