Unraveling the Misconceptions about Texas Bankruptcy Law
Dripping Springs, Texas Attorney R. Brian Daniel
There are many myths and misconceptions surrounding Texas bankruptcy. As a result of these myths, some people rush to file for bankruptcy protection under the assumption that the act of filing their case will release them from all of their debt liabilities only to later discover that some of their debts cannot be discharged at all. Others procrastinate the filing of their bankruptcy case out of a fear of losing all of their assets. In the meantime, these individuals may continue to sink deeper and deeper into debt while their credit rating continues to spiral downward. Misconceptions such as these can cause frustration, stress and financial harm when individuals act on them rather than getting sound legal advice from an experienced and qualified Dripping Springs Bankruptcy Attorney.
Some common Bankruptcy Myths (and the truth regarding each) include the following:
Bankruptcy Myth #1: Filing for bankruptcy will ruin my credit
While it is true that a bankruptcy filing is reported on your credit report, this does not in and of itself mean you will be unable to obtain credit in the future. In many situations, individuals are able to begin rebuilding their credit during the pendency of their case and may even begin to see the results of that rebuilding effort shortly after their debts are discharged through bankruptcy. In fact, many individuals find that they begin receiving credit card applications within a matter of weeks after filing. While your credit rating may take an immediate hit as the result of filing your bankruptcy case, most individuals see a similar upswing over a period of the first 12 months after they file if regular (and timely) payments are made to their utilities, auto lenders, home lenders, and if the individual is able to obtain a credit card with a small limit or a secured credit card that they can pay off every month. The reality of the situation is that an individual’s credit is much more likely to be damaged if they continue to accumulate debt or miss scheduled payments than it would be if the individual filed for bankruptcy protection and received the fresh start that the bankruptcy laws are designed to provide.
Bankruptcy Myth #2: All of my assets will be taken away if I file for bankruptcy protection
An individual’s assets are handled differently depending on the chapter (type) of bankruptcy protection that is sought; however, it is extraordinarily unlikely that an individual’s assets would all be taken away. In a Chapter 7 bankruptcy (a liquidation case), only those assets owned by the individual that have a value in excess of the numerous exemptions allowed are available to the Bankruptcy Trustee for acquisition and liquidation. If, however, an individual has equity in an asset that is in excess of the available bankruptcy exemption, then the individual will usually be given the option to pay the excess into the Bankruptcy Estate, or surrender the asset to the Trustee for liquidation. In a Chapter 13 bankruptcy (involving a payment plan pursuant to which a percentage of an individual’s debts are paid out over time), individuals are rarely required to forfeit any assets because the creditors are all going to receive a proportionate share of all monies paid into the Chapter 13 Plan. This is not to say that individuals never lose assets in a Chapter 13 case or that lenders are not granted relief from the Bankruptcy Court’s Section 362 Automatic Stay in order to move forward with a repossession or foreclosure; however, if a payment plan is proposed (and accepted by the court and the creditors), then a Chapter 13 debtor simply needs to make the approved payments to the Chapter 13 Trustee who will then divide the payments among the creditors – no assets necessarily need to be liquidated.
Bankruptcy Myth #3: All of my debt can be eliminated through bankruptcy
Most types of unsecured consumer debts, including credit cards bills and medical bills, may be eliminated (discharged) through a Chapter 7 bankruptcy; however some debts may remain. In most cases, a debtor cannot discharge the following debts: mortgages; child support; spousal maintenance (alimony), student loans; court fines and criminal restitution; or, personal injury judgments resulting from drunk driving or driving under the influence of drugs. In cases where an individual has debts that cannot be discharged through a Chapter 7 bankruptcy, careful analysis by a qualified and experienced Dripping Springs Bankruptcy Attorney may provide an individual with options including filing for bankruptcy protection pursuant to Chapter 13. In a Chapter 13 case, a debtor can place all of the non-dischargeable debt (including past due non-dischargeable debt) into a payment plan that, if approved, would permit the individual to get “caught up” over the course of between 3 and 5 years. At the end of the payment term, the debtor would be granted a discharge (assuming all plan payments had been made in a timely manner), and that person would then be in a position to have discharged most debts and to have gotten back to even on the ones that were outstanding at the time of the filing of the bankruptcy case.
Bankruptcy Myth #4: I have to be unemployed to file for bankruptcy
Your employment status may affect the type of bankruptcy case for which you are eligible; however, whether you are employed or not has no effect on your ability to file for bankruptcy protection. Parameters do exist by which an individual’s (or a couple’s) income is compared to certain median standards and if the income of the debtor(s) is higher than the applicable standard, then a Chapter 13 bankruptcy would be required instead of one pursuant to Chapter 7.
Bankruptcy Myth #5: Filing for bankruptcy is too difficult
Texas Bankruptcy law can be complicated and there are limitations you need to understand as well as specific requirements that need to be met. However, a skilled and experienced Austin Bankruptcy Lawyer can help you navigate through the process while also providing advice regarding your unique situation.
Many other bankruptcy myths also exist; therefore, it is important to speak to an experienced Dripping Springs Bankruptcy Lawyer who can help you better understand the difference between bankruptcy fact and bankruptcy fiction.
An experienced Dripping Springs Bankruptcy Attorney can also help you determine whether you are eligible to file for bankruptcy protection and, if so, which chapter best suits your specific set of circumstances. If you are considering bankruptcy protection, it is important to get solid legal advice before moving forward, so please reach out to The Daniel Law Firm. We take great pride in serving clients all over Central Texas. Let us discuss the best strategy for moving your Texas Bankruptcy case forward in both a positive direction and timely manner. Contact a Dripping Springs Bankruptcy Attorney at The Daniel Law Firm today at (512) 615-3569.