Bankruptcy offers a unique and invaluable opportunity to get a fresh start if you are overwhelmed with debt. However, it also has drastic legal and financial implications that you should understand before you dive in. In deciding whether to file Chapter 7 bankruptcy, you can ask yourself a few key questions to make sure this is really the right thing to do.
First, let’s take a quick look at Chapter 7. This type of bankruptcy allows for the elimination of debt through the liquidation of assets. In plain terms, certain assets are sold to pay off creditors and any remaining debt is erased. I must note: many assets are protected from liquidation, and not all debt is eligible to be discharged.
To learn more about Chapter 7 bankruptcy, check out the following topics:
- 2021 Texas Bankruptcy Exemptions
- Debt Elimination & Consolidation
- What Happens to Valuable Keepsakes When I Declare Bankruptcy?
Questions to Ask Before Filing Chapter 7
If you’re thinking about filing Chapter 7, ask yourself these questions first:
Is this really my only option?
Bankruptcy is an extreme solution to overwhelming debt. It should only be undertaken if it is your best option. Before considering Chapter 7, you might want to look at working out payment plans with lenders, selling assets you don’t need, and eliminating unnecessary expenses. To file, you must complete credit counseling through a government-approved agency. You have to do so within 180 days of filing, and you may find that this is enough to help you resolve debt-related matters without resorting to bankruptcy.
Do I have enough debt to make it worthwhile?
Chapter 7 bankruptcy will stay on your credit report for 10 years. Because of this, you should be absolutely certain that you have enough debt to justify filing. There is no minimum amount of debt to file Chapter 7. What is manageable will vary depending on your unique situation, so look over your debt to see what you’re really dealing with.
Will Chapter 7 eliminate all my debt?
Taking an analysis of your debt a bit further, you’ll need to consider whether Chapter 7 will eliminate all of your debt. Chapter 7 bankruptcy will typically not discharge secured debt like mortgages or car loans, student loans, and alimony or child support. Bankruptcy is best for debt like credit cards, medical bills, personal loans, and the like.
Will any of my assets be protected?
The fact that Chapter 7 involves the liquidation of assets to pay creditors can send some debtors running in the opposite direction, thinking they’ll lose everything they own if they file. This could not be further from the truth! Texas bankruptcy exemptions protect a considerable amount of property and assets, so most (if not all) of what you own may be protected from liquidation—even your house.
Do I make too much money to file Chapter 7?
You need to pass the means test to file under Chapter 7 of the U.S. Bankruptcy Code. If your monthly income is more than the median income in Texas, you will most likely not pass the means test and must consider Chapter 13 bankruptcy or another way to address your debt.
Have I talked to a professional about my options?
One of the best ways to find out whether Chapter 7 is right for you, and even to answer some of the questions listed above, is to involve an attorney. An experienced legal professional can advise you on bankruptcy law and how it may affect your unique financial situation, help you make an informed decision, and guide you through the process from start to finish to ensure you experience all the benefits Chapter 7 has to offer—while avoiding common problems and pitfalls.
Involve a Fort Worth Bankruptcy Attorney
For over 20 years, I have worked as a Fort Worth bankruptcy attorney, helping debtors from all walks of life address the most stressful and challenging problems: creditor harassment, foreclosure, wage garnishment, liens, and more. I understand what’s at stake. I know how to protect my clients’ rights and interests through every stage of the bankruptcy process, and I am honest and transparent in all of my communication, so each client knows what to expect.
To find out more, give my firm a call at (817) 576-1889. Your consultation is free!