Many individuals and families in Texas and across the country firmly believe that filing for bankruptcy to secure debt relief is a process to be avoided.
One Texas legal source on bankruptcy and its effectiveness in resolving deep debt woes prominently notes their negative assessment and disinclination to invoke bankruptcy’s protections. It stresses that “many people think there is a long-term stigma associated with filing for bankruptcy.”
Some debtors couple that view with fears that bankruptcy rules are overly complex. They also believe that they would likely not qualify as filers and that a filing result would in any case not fundamentally improve a depressed financial situation.
All those intuitive takeaways concerning bankruptcy are frequently expressed by would-be filers who balk at making a filing commitment.
They are also misconceptions that legions of debtors ultimately find to be untrue. In fact, a bankruptcy filing often turns out to be the ideal vehicle for attacking challenging debt levels, restoring economic traction and securing a fresh financial start.
If that were not true, bankruptcy would not be an explicitly recognized debtor protection under the U.S. Constitution that has endured and proven itself repeatedly viable for centuries.
What are the essentials of Chapter 7 bankruptcy?
Chapter 7 is one especially common variant of bankruptcy protection invoked by debtors facing stark challenges. Also called “liquidation” bankruptcy, Chapter 7 is a strong filing option for many individuals who meet its eligibility requirements. Those include satisfying a so-called “means test.”
The process works in the following manner, as noted by one comprehensive online overview of Chapter 7 essentials.
First, and following eligibility confirmation, a debtor’s property is gathered and divided into exempt and nonexempt assets.
Following that, the latter assets are earmarked by a trustee for sale, with their proceeds being paid to creditors in order to extinguish as much debt as possible. Obligations that remain will be judicially discharged.
Here are some elements of special note linked with a Chapter 7 filing:
- Designation of select assets deemed exempt, which shields them from sale and provides for their retention by a debtor (e.g., a primary residence, car, business tools and some personal property)
- Discharge of unsecured debt like credit card obligations and medical bills
- Issuance of “automatic stay” that stops harassment and creditor contacts
- Relatively quick process, often being completed within a few months
- Ability to steadily improve credit score and standing following a fresh start
The above-cited overview duly notes that, “Getting the right help when you file for bankruptcy is crucial to its success.” A proven debt-relief attorney with a deep background in bankruptcy law and debtor representation can help ensure a positive experience and outcome.