The Purposes of Filing for Bankruptcy:
Bankruptcy serves two main purposes:
- Bankruptcy may give creditors some payment on their debts
- Bankruptcy gives you a fresh start by canceling magny of your debts through an order of the court called a discharge
There are four types of bankruptcy available to individuals and small businesses:
- Chapter 7 (a liquidation-style case for individuals or businesses)
- Chapter 13 (a payment plan or rehabilitation-style case for individuals with regular income)
- Chapter 12 (a payment plan or rehabilitation-style case for family farmers and fishermen)
- Chapter 11 (a more complex rehabilitation-style case used primarily by business debtors)
The two most common forms of bankruptcy for consumers are chapter 7 & chapter 13 bankruptcy. Both chapters provide for some possible payments to creditors, a discharge for you and supervision by a trustee.
Chapter 7 may involve surrendering certain non-exempt property (in the unusual case where the debtor has property which is not exempt under Texas or Federal exemptions) in return for a discharge of many of your debts.
The bankruptcy trustee will sell any non-exempt property and pay the proceeds to your creditors.
Chapter 13 allows you to keep your property, but you must commit to a five-year repayment plan. You then obtain a discharge of any legally dischargeable debts not paid in the plan.
In both types of bankruptcy, creditors must stop efforts to collect debts after you file your case. This protection is called the “automatic stay.” In a Chapter 7, this relief is often temporary since you must still pay your secured debts (usually a home and/or car) or the creditor may ask the court to remove the automatic stay.
If you would like more information about bankruptcy, contact the Law Office of Howard Tagg today at (903) 581-9961 to schedule your free consultation or fill out the form below.