If you are swamped with debt, you can discharge all of your credit card and unsecured debt in a Chapter 7 immediately, keeping exempt assets such as a house or car, and other household items. However, if you earn more than the median income in Texas (for your household size), then the new bankruptcy code (BAPCPA) states that you may no longer be allowed to file for Chapter 7.
That’s where a Chapter 13 bankruptcy comes in…
Just like in a Chapter 7, a Chapter 13 debtor can avoid paying credit cards and other unsecured creditors. But unlike in a 7, in a Chapter 13, the bankruptcy will not discharge all of that debt at once. Some of that debt might have to be paid back over a period of years. How much you will have to pay back to credit cards and other unsecured creditors is truly and simply based on your ability to pay. The concept of Ability to Pay is determined in the code and with the help of your attorney during the bankruptcy data collection process. The result is a number listed in your bankruptcy filing called your disposable monthly income.
Your disposable monthly income is what the bankruptcy code and IRS standards determines as the amount of money you will have have left-over every month after all of your monthly secured debts (house & car) are paid and after all of your necessary living expenses are paid (including housing, food, clothing and other expenses). Disposable monthly income is often lower than you think it might be. That is because most people who are considering bankruptcy in Texas have enough secured debt (home and cars) to consume most of their income. That is – after all – why most people consider a bankruptcy in the first place; because they are having trouble paying their bills. The key here is that secured debt has absolute priority over credit card and other unsecured debt in a chapter 13.
This type of relief, just like in a Chapter 7, is intended to get you back on your feet with a fresh start under the law. It is an effective solution and financial plan for individuals who have income, but cannot sensibly go forward with their lives under the strain and pressure of mounting credit card debt or imminent foreclosure.
[...] out how much you will have to pay every month to unsecured creditors in a Chapter 13 Plan, check here (usually it is only pennies on the dollar). A Chapter 13 will only be confirmed for those who [...]
[...] Bankruptcy is intended to help a person in financial crisis get a fresh start, but the laws and regulations you need to comply with are very complex and vary from person to person, and state to state. An online service can help someone prepare a petition, but it cannot serve as an advocate to help someone navigate through this confusing process. Anyone facing bankruptcy is likely to be feeling overwhelmed and emotional, and a qualified bankruptcy attorney will provide guidance and advice to help them get through the ordeal. In Collin County Texas, where I practice, I have seen many bankruptcy cases dismissed with prejudice because someone failed to meet a deadline or provide the right information: I would hate to see anyone lose the protection a bankruptcy can provide because they didn’t have a trusted adviser to help them meet the many detailed requirements of the Bankruptcy Code. [...]
[...] alone are: (a) if one spouse has a lot of separate property, (b) if that separate property is exempt, and (c) if both partners each have a lot of separate property and (d) if either partner has a lot [...]