In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law by President G.W. Bush. This was the “bankruptcy overhaul” bill that was long sought after by lobbyists in the credit card and lending industries, essentially making it more challenging for individuals to file Chapter 7 bankruptcy and discharge their debt. One of the main goals of this bill was to prevent abuse of the bankruptcy system and to steer more consumers needing debt relief towards a Chapter 13 filing. However, despite many misconceptions, a Chapter 7 bankruptcy is still attainable for most credit consumers in the state of Texas. Below are some of the differences between the two filings:
Chapter 7 Bankruptcy – This type of bankruptcy is considered a liquidation of assets (less exempt items, such as a home and vehicle) and relieves a debtor from his or her debt roughly five-to-six months after a case is filed. A Chapter 7 discharge will absolve a person of their debt, with the exception of items such as student loans, child support, and other non-exempt financial obligations. Additionally, a “means test” must be instituted for those seeking Chapter 7 to see if that person would potentially be abusing the bankruptcy system by filing for Chapter 7. Essentially, a comparison of one’s household income is made against the median income of households of the same size in Texas. If a debtor does not pass the means test, they will need to seek relief under Chapter 13.
Chapter 13 Bankruptcy – Under a Chapter 13 filing, a debtor agrees to make monthly payment to creditors under a mutually agreed upon plan. In most cases, the amount being paid back is only a small portion of the outstanding debt owed. When the agreed amount is paid over time, a discharge is entered and the debtor is no longer required to make payments on his or her outstanding balances.
It’s important to remember that each person’s financial situation is different and unique. There is no “cookie cutter” process and there will be various scenarios that determine whether or not you would be eligible for Chapter 7 or Chapter 13. Keep in mind, it may take time to completely resolve your bankruptcy case, but when you retain a bankruptcy attorney, all of your creditors will be put on notice and by law, are required to cease their debt collection efforts.
If you live in or around the Houston, Texas area and are struggling with debt, contact the Weber Law Firm today to discuss your options. We have experienced bankruptcy attorneys that will help you navigate through the entire process and get you on a debt-free path as soon as possible.
We can be reached at 713-789-3300 and offer a free and private consultation.
Contact us today to get your fresh start in 2013!