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Why You Should Hire an Attorney to Handle Your Bankruptcy
Bankruptcy can be a complex and overwhelming process for any individual to have to go through. While it may be tempting to navigate the process alone, hiring an attorney is almost always a wise decision. Therefore, it is essential to understand why hiring an attorney is essential when going through bankruptcy proceedings. With proper legal guidance, you can confidently get through this challenging process.
Experience Matters
In so many areas of law, experience is an important trait for an attorney to possess, especially when it comes to bankruptcy. Bankruptcy law is intricate and constantly evolving. Hiring an attorney with ample experience ensures that you will have access to their years of experience in handling similar cases. They understand the nuances of the law's potential pitfalls and can guide you through the entire process, making it less stressful and more efficient.
Assessing Your Options
In Texas bankruptcy, your attorney will need to thoroughly analyze your financial situation, assets, debts, and income to determine the most suitable bankruptcy option for you. They can assess whether Chapter 7 or Chapter 13 bankruptcy is more appropriate or explore alternatives such as debt consolidation or negotiation. Their knowledge will help you make more informed decisions that align with your goals and maximize your chances of obtaining a favorable outcome.
The Impact of Bankruptcy on Your Credit Score in Texas
Filing for bankruptcy in Texas can provide critical financial relief when you are buried in unsustainable debt. However, it also inevitably affects your credit score and report. Here is a look at how different types of bankruptcy filings can impact your credit in Texas, both short and long term and how an attorney can help.
The Immediate Credit Score Drop from Bankruptcy
Your credit score will decrease significantly in the months immediately following either a Chapter 7 or Chapter 13 bankruptcy filing in Texas. This happens for several reasons. First, all accounts included in the bankruptcy will be closed or marked with a negative status, subtracting from your credit mix. Your credit utilization ratio will suddenly jump since your total limits decrease while balances owed may remain similar pre-filing.
Bankruptcy can also impact your payment history, as any missed payments leading up to or during the bankruptcy are reflected. Finally, the public bankruptcy filing itself on your report drags the score down. The extent of the drop depends on your starting score, but a decrease of 50-150 points is very common in the first few months after filing.
Can Filing Bankruptcy Stop Wage Garnishment in Texas?
Few financial situations feel more stressful or overwhelming than having your hard-earned wages garnished by creditors. However, filing for bankruptcy in Texas may stop ongoing wage garnishments in their tracks while also permanently eliminating the underlying debt through discharge so you can recover and regain financial stability. Here is an extensive look at how declaring bankruptcy with a lawyer can halt creditor wage garnishment.
How Bankruptcy’s Automatic Stay Stops Collections
When you file a Chapter 7 or Chapter 13 bankruptcy petition in Texas, an "automatic stay" will go into effect immediately under federal law. This triggers a broad legal injunction that prohibits any continued garnishment of your wages and halts all collection activity against you. The automatic stay specifically prevents creditors and collectors from pursuing repossession of property, foreclosure of homes, disconnection of utilities, civil litigation against you, or any other debt collection activities. They cannot legally garnish your wages or bank accounts after you file bankruptcy without getting the stay lifted.
How Bankruptcy Impacts Student Loans in Texas
Student loans are notoriously difficult to discharge in bankruptcy. The specific impact bankruptcy can have on student loan debt often depends on the loan type and bankruptcy chapter. Here is a more in-depth look at how different student loans are treated in bankruptcy cases. For more detailed information, contact a Texas bankruptcy attorney.
Federal Student Loan Dischargeability
Most federal student loans, including Stafford, PLUS, and Perkins loans, cannot be discharged through bankruptcy in Texas. These loans fall under the U.S. Bankruptcy Code's "undue hardship" provision. To prove undue hardship and attempt federal student loan discharge, you must file an adversarial proceeding in bankruptcy court against the lender and prove:
- You cannot maintain a basic living standard if forced to repay loans
When Are Chapter 7 Cases Subject to a Presumption of Abuse?
Not everyone qualifies for Chapter 7 bankruptcy. Only individuals and married couples who do not earn much income are eligible for this kind of debt relief. Meeting the income limits for Chapter 7 bankruptcy is also known as “passing the Chapter 7 means test.” If someone files for Chapter 7 bankruptcy but does not pass this means test, their case will likely be dismissed due to the court’s presumption of abuse. This is why it is important to have a Texas bankruptcy lawyer assist you with your case.
How Can a Filer Abuse the Chapter 7 Process?
Unlike Chapter 13 bankruptcy – which requires filers to stick to a repayment plan for three to five years – Chapter 7 bankruptcy filers do not have to repay their creditors before their qualifying unsecured debts can be discharged. Because creditors have rights too, the courts reserve the extreme benefits of Chapter 7 bankruptcy for low-wage earners who are unlikely to be able to repay their debts anytime soon.
How a Chapter 13 Bankruptcy Can Help Save Your Home
For homeowners facing the possibility of foreclosure, Chapter 13 bankruptcy is a potential lifeline. This debt reorganization plan offers a fresh chance to regain control of your financial situation and safeguard your home from repossession. If you are in danger of losing your home, exploring Chapter 13 bankruptcy could be the solution you have been seeking.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy presents a structured strategy for debt repayment. Spanning a period of three to five years, this plan enables you to create a practical repayment schedule, encompassing all your creditors, including your mortgage lender. As an advantage, your monthly payments are determined based on your income and expenses, making them more manageable.
After completing your Chapter 13 bankruptcy plan, outstanding balances for certain debts may be discharged as long as certain criteria have been met, including meeting all domestic support obligations and the completion of an approved financial management course. There are some debts that cannot be discharged, including home mortgages, child support and alimony debt, certain taxes, student loans, and more.
How Long Does a Bankruptcy Automatic Stay Remain in Effect?
One of the primary reasons that individuals choose to file for bankruptcy is that filing a case in bankruptcy court initiates an automatic stay. Once the automatic stay is in place, most collection activity – including wage garnishment, creditor lawsuits, repossessions, and foreclosure actions – must cease until a filer’s bankruptcy case is resolved or the court grants a creditor-specific allowance to bypass the restrictions of the automatic stay. As a result, while the benefits of the automatic stay are undeniable, filers cannot count on them to last forever.
Taking Advantage of the Stay: Chapter 7
Most successful Chapter 7 bankruptcy cases are resolved in a matter of months. As a result, the automatic stay only tends to function as a short “pause” button on creditor action for Chapter 7 filers. Meaning, once a filer’s eligible debt has been discharged at the conclusion of their case, the automatic stay will lift and any collection action that has not been resolved via discharge will resume.
Life After Bankruptcy: Learning from Detroit
When an individual files for bankruptcy, their focus naturally tends to remain on the urgent financial needs that prompted them to file for debt relief in the first place. They may have concerns about life after bankruptcy, yet, the very act of filing for Chapter 7 or Chapter 13 protection indicates that one’s financial situation is so dire that thinking ahead has become a luxury.
When the dust settles, a bankruptcy filer may start to focus more on both the temporary, negative consequences that their filing has inspired and on rebuilding their credit. It is at this phase of the bankruptcy process that learning from Detroit can come in handy.
Eating an Elephant
Ten years ago, Detroit, Michigan became the largest-ever city in the U.S. to file for bankruptcy. The city is now experiencing new growth and new opportunity but getting to this point was not an easy journey and that journey is not yet over. One building inspector described the experience of rebuilding and revitalizing the city as "We’re eating an elephant here," when interviewed by the New York Times.
Stay Off Social Media Until Your Bankruptcy Case Is Resolved
Filing for bankruptcy can be a stressful process, but it can also lead to a much-needed emotional and practical unburdening. You may ultimately feel so grateful that your interests are finally safeguarded by the automatic stay and that your case is moving forward that you feel inspired to post about your experience on social media. Yet, as difficult as it can be to refrain from connecting with others about this turning point in your financial journey, it is important to resist that urge until your case is fully resolved.
Your Social Media Activity Is Not Private
Social media platforms are public. Unlike email and text communications, which government investigators and actors can only generally access in the event that they have secured a warrant, anyone can search someone’s social media activity. If the trustee assigned to your bankruptcy case, a creditor, or a creditor’s legal representation chooses to review your social media activity, do not assume that strong privacy settings will safeguard your activity. You will want to assume that these interested parties both can and will get around your settings to view your activity.
Is Debt Settlement a Scam or a Good Option?
When an individual is struggling mightily with debt, they often need assistance with resolving one or more accounts immediately. Waiting even a week to find a solution can result, under some circumstances, in repossession of a vehicle, the initiation of a creditor lawsuit, or so much stress when creditors call again and again that an individual’s mental health begins to break down. Because debt resolution issues tend to be particularly urgent in nature, bankruptcy alternatives – including debt settlement services – that promise quick results can be very attractive. It is simply important to understand the true ins and outs of any debt management or resolution opportunity before committing to an approach.
The Benefits and Limitations of Debt Settlement
Some debt settlement opportunities are legitimate. For example, if the Internal Revenue Service will allow you to submit payment for an offer in compromise, you will be able to settle your overdue tax balance for a fraction of what you owe. This can be a beneficial approach to debt resolution for debt that is not dischargeable in bankruptcy. However, for-profit debt settlement services – which often focus on debt that is dischargeable in bankruptcy – are often either scams or scam-like.
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