In Texas, individual debtors can file for either Chapter 7 or Chapter 13 bankruptcy. To file for Chapter 7 bankruptcy, the debtor must meet income limits or satisfy the means test. In addition, Chapter 7 is a liquidation proceeding, meaning the bankruptcy trustee seizes the debtor's non-exempt assets to repay the creditors. The debtor is able to keep exempt assets. In a Chapter 13 plan, a debtor continues to pay off debts under an installment plan administered by the bankruptcy trustee. The debtor retains possession of all assets throughout the term of the plan.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a good option for individuals who have regular and reliable income that would like to keep their assets. To be eligible for Chapter 13 in Texas, the debtor must have regular monthly income for at least six months prior to filing for bankruptcy. In addition, a Chapter 13 bankruptcy is designed for people who are behind on their house payments and their property is about to be foreclosed upon, or behind on their vehicle payments and their cars are about to be repossessed.
Filing for Chapter 13 bankruptcy stops the foreclosure proceeding and will prevent a car from being repossessed because of a protection called the automatic stay. The automatic stay goes into effect immediately after the debtor files the bankruptcy petition. The automatic stay prevents creditors from contacting a debtor directly and will prevent an action by the creditor against the debtor during a bankruptcy.
Filing for Chapter 13 bankruptcy allows a debtor to catch up on missed payments, and pay a monthly installment to the creditor while they retain possession of their house or car. However, if the debtor already has notice of the foreclosure, a creditor may file a motion for relief from the automatic stay to continue with the foreclosure action.
Chapter 13 Repayment Plan and Discharge
Within 15 days of filing the bankruptcy petition, the debtor must file a repayment plan. The life of the repayment plan is between three and five years, depending on the amount of debt and the debtor's monthly income and expenses. The debtor works with the help of a bankruptcy attorney to create a Chapter 13 repayment plan to make installment payments to creditors over whatever period the bankruptcy court allows within the five years. The court confirms a debtor's plan at the confirmation hearing. The debtor's creditors may attend the hearing and can object to any part of the proposed plan. If the plan is approved, the debtor begins making monthly payments directly to the bankruptcy trustee. If the debtor completes the repayment plan, he or she will receive a bankruptcy discharge. All debts included in the repayment plan are forgiven.
Getting Legal Help
If you are considering filing for Chapter 13 bankruptcy in Texas, contact an experienced bankruptcy attorney. An attorney will evaluate your financial situation and answer any questions you have about filing for bankruptcy.