Frequently Asked Questions About Bankruptcy:
What is the main difference between chapter 7 and chapter 13 in bankruptcy
Answer: Both chapter 7 and chapter 13 are available for individuals who wish to file for bankruptcy. The primary difference is that most unsecured debts will be discharged in chapter 7, if a debtor gets a discharge through the bankruptcy court. In chapter 13 at least some of the unsecured debts will be partially paid back, generally over five years (no interest and penalties if monthly payments made on time to the Trustee).
Why does a person file chapter 13 and not always chapter 7?
Answer: That decision is normally made based on a person’s income and debts. The new bankruptcy law established a “means test” that lets a person know which chapter they are expected to file. (Exceptions may be made based on certain provisions.) (See our home page at our “fast contact for free literature” portion to request a free e-mailed copy of the means test for you to fill out.)
If I file for bankruptcy will I have to make a lot of court appearances?
Answer: Normally if a person has filed everything properly, and no party objects, you will only have to attend one “creditors’ meeting”. It is held by the Trustee in a conference room area (not a courtroom.). At that meeting you will be asked a few questions by your attorney and some by the Trustee. Once all those are complete then the Trustee will dismiss the meeting. It is very seldom that any actual creditors come to your meeting. (Plan to bring your social security card and your driver’s license to this meeting.)
Who is the trustee?
Answer: The Trustee is an appointed person who will review all your bankruptcy information and be sure it is in order. She (or he) will also investigate to see if there are any assets that are not exempt under the exemptions claimed by you in your bankruptcy documents.
What are exempt assets?
Answer: The purpose of bankruptcy is to give you a fresh start. The purpose is not to make people destitute. Texas allows certain property to be exempt from seizure by creditors. Federal rules also allow certain property to be exempt from seizure by creditors..) (See our home page at our “fast contact for free literature” portion to request a free e-mailed copy of a portion of the Texas exemption statutes.)
Should I claim Texas or federal exemptions?
Answer: Texas permits debtors to choose one or the other. It is a strategic decision made by you after consultation with a bankruptcy attorney.
Will I lose my home and car in bankruptcy?
Answer: Homes and cars are generally called secured property. That means they have been purchased through some financial agency that has the right to reclaim that property if the payments are not made. If you make your payments, as normal, for your home and your car then you will not normally lose them in bankruptcy. The new bankruptcy law does have certain limits that did not apply before. If you have been a domiciliary of Texas for over two years then you probably can exempt the entire equity of your home in bankruptcy. These are matters that you should discuss with a bankruptcy attorney.
Why do most people file for bankruptcy?
Answer: Most people who file for bankruptcy have good reasons. They have either lost their job, their spouse has lost their job, there are medical issues, there has been a divorce, or the economy has created other problems. Regardless of the reason it gives a person a fresh start in their economic life.
If I file for bankruptcy are all my financial problems solved?
Answer: Filing for bankruptcy is just the first step. You must also meet all the standards for bankruptcy and eventually receive a discharge in order to complete the bankruptcy process. You also must solve the problem that created the bankruptcy, i.e. lower monthly expenses, balance your budget, or do whatever is necessary to end your negative cash flow. Bankruptcy, provided you get a discharge from the court, should help you accomplish that by eliminating, or reducing certain debts.