The bankruptcy code has two chapters for personal bankruptcy, Chapter 7 “liquidation” and Chapter 13 “reorganization” bankruptcy. An experienced bankruptcy attorney can help you determine which type is best for your unique situation.
Chapter 7
Chapter 7 is bankruptcy in its simplest form. Chapter 7 is also called regular, straight, or liquidation bankruptcy. You can have all of your qualifying unsecured debt eliminated in as little as three to six months. There is no payment plan in this type of bankruptcy.
The trustee assigned to your case can take any of your non-exempt property and sell it to satisfy your creditors. Any money collected will be distributed to your creditors by priority debt.
You will still have your secured debt, such as your home and your vehicle. If you want to keep the collateral, you must continue to pay the debt. You can also choose to forfeit the secured property to be sold to satisfy the debt. Due to the exemption laws, most people lose little to no assets when they file bankruptcy.
Chapter 13
Chapter 13 bankruptcy is more involved than a Chapter 7 bankruptcy. Chapter 13 bankruptcy will reorganize your debt and give you time to catch up on your secured debt. At the end of your payment plan of three or five years, all qualifying unsecured debt will be discharged. You will be able to keep all of your assets in this type of bankruptcy. If you have assets that would not be covered under the exemption laws and wish to keep it, this type of bankruptcy will allow you to do that.
If you are behind in your debt and are unsure about what type of bankruptcy would best suit your needs, talk to a Houston bankruptcy attorney to find out how you can get financial relief.