Bankruptcy can be a scary word and it can be even scarier if it is something you have been considering. Bankruptcy is still considered by some to be a taboo or something to be avoided at all costs. In reality, bankruptcy can be the best option for some people who are drowning in debt. Filing for bankruptcy does come with a few unfavorable consequences, which should be factored into any consideration when determining whether or not to file for bankruptcy. Speaking with a skilled Texas bankruptcy lawyer can help you understand your situation a little better.

To File Or Not to File?

It can be confusing to know whether or not you should file for bankruptcy. Every person’s situation is different, which is why every decision to file for bankruptcy is different. For the most part, you should consider filing for bankruptcy if you are unable to repay your debts after you have paid for necessities such as food, living expenses, and healthcare. However, there are a few other situations in which you may also want to consider filing for bankruptcy:

For many people, filing for bankruptcy is a fresh start in life. If you have filed for a Chapter 13 bankruptcy, you are still technically paying off your debts, just in a manner that is more manageable for you. A Chapter 13 bankruptcy consolidates all of your debt and creates a repayment plan that lasts for three to five years, depending on your situation. Your monthly payment amount is more than just taking the amount of debt to be repaid and dividing by the number of months you are required to pay. The amount that you are ordered to pay each month is the result of a formula that takes into account your income, assets, debts, and expenses. For some people, this number is a manageable payment. For others, it can be a burden or become one because of a variety of situations.

Qualifying for a Modification

Not everyone can qualify to get their Chapter 13 repayment plan modified. The courts will not entertain a request to modify your plan just because -- you have to have a legitimate reason/need for the modification. The most common reason modifications are granted to Chapter 13 repayment plans is because of changed circumstances. These circumstances must be significant enough to severely limit your ability to meet the terms of your current repayment plan. Examples of a significant change in circumstances include:

Filing for bankruptcy is often the last resort for many people. If you successfully file for bankruptcy and your debts are discharged, it can affect your current and future finances for years, which is why people do not typically get a bankruptcy unless they absolutely have to. For most forms of bankruptcy, receiving a discharge of your debts is typically the end goal. Most debts can be discharged or forgiven in a bankruptcy, but there are certain types of debts that either cannot be discharged or will not be discharged based on certain circumstances.

Student Loans

When it comes to student loan debt, it is almost never automatically discharged in a bankruptcy. If you are looking to have your student loans forgiven, you must prove to the court that making your student loan payments would cause you undue hardship. To do this, you have to prove that making your student loan payments would not allow you to maintain a minimal standard of living, you will likely be in a tight financial situation for the remainder of your student loan repayment period and you have made a decent number of payments in good faith on your loans.

Many people believe that being married means you automatically take on your partner’s debt. While it is true that assets you accrue during the marriage can be considered joint assets, that is not always the case for debts. You will only be legally responsible for your spouse’s debts if both of your names were used when you incurred the debt. It is not uncommon for only one spouse in a marriage to file for bankruptcy individually. Many of these single-spouse situations happen when a couple is married and one spouse has debt that they are having trouble repaying. For some couples, a major concern is whether or not they should file for bankruptcy jointly or separately.

Community Property and Community Debts

Before you decide if you will be filing for bankruptcy separately or with your spouse, it is important to look at the entire situation. Texas is a community property state, meaning that most of the property that was acquired during the marriage is jointly owned, or belongs to the “community,” which is you and your spouse. Because of this, even if just one spouse files for bankruptcy, all of the community property becomes part of the bankruptcy estate.

Coming to the decision that your best option is to file for bankruptcy is not easy. You may have taken weeks, if not months to realize that your best option is bankruptcy. The bankruptcy process can be confusing because of all of the legalities and people involved with the process. When you file for bankruptcy, the United States Trustee Program will assign you a bankruptcy trustee who will be responsible for overseeing your case. The trustee is one of the most important people in your case, so it is crucial that you understand the role of the trustee and the impact the trustee can have on your case.

What Is a Bankruptcy Trustee?

The role of a trustee was created to prevent the creditors and courts from having to be the ones responsible for collecting and distributing the property of those who file for bankruptcy. Trustees are independent contractors who are not employees of the bankruptcy court, but they must answer to the court and cannot take any kind of action until the court approves it. The trustee will evaluate and make recommendations pertaining to the demands of different debtors involved in the specific bankruptcy case they are assigned to.