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Choosing between Chapter 7 and Chapter 13 bankruptcy in Texas

Anybody may find themselves facing financial challenges, including overwhelming debt. This is especially true in an economy that has been mostly slow to recover from the recent recession in Texas and everywhere else in the nation. Many people who have run out of options will decide it is time to file for bankruptcy. However, one will still have to decide whether to file a Chapter 13 or Chapter 7 bankruptcy.

The most common type of bankruptcy filed by individuals is a Chapter 7 bankruptcy. This type of bankruptcy liquidates all of the petitioner's property that is not exempt. Some types of property that are usually exempt include clothing and household goods. Funds garnered through liquidation will be given to creditors with the remaining debts being discharged.

On the other hand, many people do not wish to part with their assets and property for one reason or another. For these individuals, a Chapter 13 bankruptcy may be a better option. This type of bankruptcy will work out a repayment plan to pay creditors over the course of three to five years. After the repayment period has ended, the rest of the debts owed are discharged.

Ultimately, one will have to look at the specific details of one's financial situation in order to decide whether to file a Chapter 7 or Chapter 13 bankruptcy in Texas or in any other state. After choosing what type of bankruptcy to file, a person will have to be sure to follow the correct legal procedure as well as properly fill out the necessary court documents. Even the smallest of mistakes can cause a bankruptcy petition to be thrown out by the court.

Source: BusinessDay, How to know when to declare bankruptcy, No author, Feb. 10, 2014

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