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Sept. 11, 2017

For those who are struggling to meet their financial responsibilities, bankruptcy can be an option to unburden themselves from their debts and gain a fresh financial start.

However, there are many factors you must consider before deciding whether bankruptcy is right for you.

Below are some questions you should ask yourself if you are beginning to consider filing for bankruptcy protection:

Will bankruptcy really help me?

Think about the types of debts you currently have and what you hope to achieve by filing for bankruptcy. Certain debts cannot be eliminated with a bankruptcy discharge, so if most of the debts you have are non-dischargeable, bankruptcy probably will not provide much relief.

Your creditors might also be willing to work with you to settle your debts. If this is an option, you might not need to file for bankruptcy at all.

Be sure to consider all the alternatives to bankruptcy before deciding it is your best path forward.

Do I qualify for bankruptcy?

There are eligibility requirements for both Chapter 7 and Chapter 13 bankruptcy. To qualify for Chapter 7, you must have a low enough income that you can pass the bankruptcy means test. Chapter 13 eligibility hinges on the total value of your debts—it must not exceed specific dollar limits.

Could I face legal action?

Creditors may decide to take you to court if you have not been making your required payments. Potential consequences of legal action include wage garnishment or liens on your assets. If you file for bankruptcy, however, an automatic stay will go into effect, preventing creditors from proceeding with collection actions such as lawsuits. To that end, bankruptcy can help you find debt relief while also keeping you out of court.

Am I facing foreclosure or repossession?

If you have secured debts, such as a mortgage or vehicle loan, your lender could either foreclose on the loan or repossess the property if you fail to meet your financial obligations. Most of the time, you cannot eliminate a lien on your property through bankruptcy. However, you can delay or stop the foreclosure or repossession process.

Chapter 13 bankruptcy may allow you to catch up on payments you have missed, reduce your loan balance via a cramdown and eliminate unsecured junior liens from your home.

How much property do I have?

Another important consideration in bankruptcy is the total value of your property. There are some bankruptcy exemptions that allow you to keep property in Chapter 7, but a trustee has the authority to sell off any of your non-exempt assets to pay off your debts. In Chapter 13, you can keep your property, but must eventually pay your unsecured creditors an amount that is at least equal to the value of those non-exempt assets.

To learn more about all the factors you should consider before filing for bankruptcy in Texas, speak with a trusted attorney at Marcos D. Oliva, P.C.