Chapter 13 Asset Protection

One of the reasons people fail to secure proper debt relief solutions is due to fear of losing their property or assets. Much of this fear stems from myths about bankruptcy and a lack of understanding how the bankruptcy process works. Unfortunately, this often leads people to sit by and not take action; ultimately putting them at greater risk of the negative outcomes of debt. In many cases, filing for bankruptcy could offer greater protection of your assets and property than doing nothing to resolve your debts. However, each bankruptcy case is unique and the details determine the success of the debt elimination.

Chapter Considerations

There are two main types of loans: secured and unsecured. In a secured loan, such as a car or mortgage, the property items are used as collateral on the loan. Therefore, if the borrower defaults on a secured loan, the lender has the right to seize or repossess this property. In an unsecured loan, such as a credit card debt, the borrower is not putting up any collateral. In fact, the lender is at risk of losing any funds if the borrower fails to pay the loan. These unsecured loans are the main type of consumer debt which is discharged in bankruptcy. It is for this reason that debt relief attorneys will always file a “chapter 13“ bankruptcy, as opposed to a “chapter 7“ bankruptcy.

In a chapter 13 case, the property of the debtor is protected from seizure. The courts do this by creating a repayment plan, where the debtor is required to pay a set amount each month for a set period of time, usually three to five years. This plan is created by the debtor in conjunction with the bankruptcy attorney. This plan is enforced by the court, and the court will not allow the debtor to get a discharge until the plan is completed in full. This means that the debtor will have to pay the entire amount of the secured and unsecured debt even if it has been discharged. In the case of a chapter 7 case, the property of the debtor may be seized by the creditor before the discharge, and the full amount of the loan could be collected by the creditors. Therefore, if someone has substantial assets or a high income, bankruptcy may be a better option. A chapter 13 bankruptcy will allow the debtor to pay off the debt in the most economical manner, with a greater degree of protection in the event that the debtor should change his or her mind.

If you are at risk of foreclosure or seeking relief from your debts, contact our Houston bankruptcy attorney office today.