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Various types of personal bankruptcy available in Texas

When considering bankruptcy, individuals should understand what options they have available. Bankruptcy laws in Texas and in every other state are made so petitioners can receive a brand new beginning and start their financial lives over again. However, the laws can be complex; therefore, self-education is important before proceeding with bankruptcy. There are a variety of different forms of personal bankruptcy to choose from, each with its own advantages and disadvantages.

Usually consumers choose between Chapter 7 or Chapter 13 bankruptcy. The most essential differences lie in which debts the petitioner is allowed to discharge or reorganize. Another important difference between the two forms of bankruptcy is what property a filer may keep. Also, each type of bankruptcy will have a different effect on a person's credit rating.

A Chapter 7 bankruptcy is the simplest form of bankruptcy and can be completed within two to three months. This type of filing is advantageous for those with a small amount of assets and little or no income remaining after paying for basic living expenses. Petitioners will be forced to liquidate any property that does not fit specified exemptions. The bankruptcy trustee will sell the property in order to repay creditors, while much of the remaining amounts owed will be discharged.

On the other hand, a Chapter 13 bankruptcy may be preferable for those who have significant assets they would like to hold on to, such as real estate property. This type of personal bankruptcy reorganizes debts into manageable payments by creating a plan to repay debts over the course of three to five years. Also, the court may allow the petitioner to discharge or modify some of their debts.

Bankruptcy can be a solution for consumers faced with overwhelming debt, but is normally a last resort for people. Filing for bankruptcy can help people better understand their debts and offer them the opportunity to have a majority of their debts discharged. Bankruptcy often gives Texas residents the opportunity for a fresh start away from stifling debt.

Source: The Commercial Appeal, "Better Business: Before seeking bankruptcy, understand your options," Randy Hutchinson, July 7, 2012

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