Why Chapter 13 May Still Be a Good Option When You Don’t Qualify for Chapter 7
When you’re facing personal financial challenges, there are generally two bankruptcy options that can give you a fresh start—a liquidation of debt under Chapter 7 and the reorganization of debt under Chapter 13. You must, however, qualify to discharge your debts under Chapter 7 by submitting to a “means test,” where you demonstrate to the court that you lack the resources to repay creditors over a three-to-five-year period. If you don’t meet the criteria to file Chapter 7, you can still file under Chapter 13 and work out new payment arrangements with creditors. What are the benefits of filing under Chapter 13?
The Advantages of a Chapter 13 Bankruptcy Petition
- You can typically keep all your property when you file under Chapter 13—This can be a significant determining factor in most others states but is less so in Texas. That’s because Texas has extremely liberal property exemptions for a Chapter 7 bankruptcy. For example, there’s an unlimited exemption for your personal residence, so you can file a Chapter 7 bankruptcy without worrying about losing your home. In other states, about the only way you can file bankruptcy and keep your home is under Chapter 13.
- You can typically reduce the amount of your debts significantly—When you file under Chapter 13, you must submit a reorganization plan for approval by both your creditors and the court. If the court perceives the plan to be unworkable, they will not approve it. That provides an incentive for your creditors to make some concessions. In addition to lowering principal balances, you can often reduce interest rates on your debt through a Chapter 13 bankruptcy.
- Chapter 13 can make paying your debt much easier—When you file under Chapter 13 and work out payment arrangements, you’ll make a single monthly payment to the bankruptcy trustee, who will then disperse funds to your creditors. You won’t have to worry about missing one of a number of monthly payments.
- You can typically keep your income tax refund when it arrives—In Chapter 13, you can ask the trustee to include your refund as a part of your reorganization plan, so that your monthly payments already account for it. That’s typically not the case with a Chapter 7 filing.
Contact an Experienced Rockwall, TX Bankruptcy Attorney
Make certain a Chapter 7 filing will provide the fresh start you need. At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
