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Boerne Bankruptcy Law AttorneyThere are many forms of debt that can affect a family’s financial situation, and credit card balances are one of the most common types of debt. A person who has fallen behind on credit card payments or who is struggling to pay all of their ongoing expenses may experience a number of problems, including harassment from creditors who are seeking repayment. Those who have extensive credit card debts that they are struggling to pay may be wondering whether filing for bankruptcy would be beneficial.

Discharging Credit Card Debts Through Bankruptcy

Bankruptcy allows a person to receive a fresh financial start by eliminating certain debts. Credit card debts can be discharged through bankruptcy, and the type of debt relief available will depend on a person’s financial resources, the assets they own, and whether they have any other debts that they will need to address.

Chapter 7 bankruptcy is often the preferred option for addressing credit card balances and other unsecured debts, since it will allow these debts to be eliminated relatively quickly and easily. However, a person will need to pass a means test to qualify for this type of bankruptcy, and they may also be required to turn over certain non-exempt assets during the bankruptcy process. 

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Kerrville Bankruptcy AttorneyThere are many situations where a person may face overwhelming debt that they are unable to repay. In these cases, a person may need to deal with harassment from creditors, who may do everything they can to collect what is owed. In some cases, creditors may pursue legal action, and a debtor may worry that their wages may be garnished or that a creditor may attempt to freeze their bank account and prevent them from accessing or spending the money they have earned. By understanding how these cases are handled in Texas, debtors can determine their best options for addressing these issues.

Wage Garnishment and Attachment

In much of the United States, creditors may pursue judgments against those who owe them money, and if a court rules in their favor, they may be able to garnish a person’s wages. In these cases, a percentage of the person’s income will be withheld from their paychecks and sent to the creditor. However, Texas limits the types of cases where wage garnishment is available. Generally, wages can only be garnished to pay child support or spousal support that is past due. The IRS can also garnish wages to collect tax debts, and wage garnishment may also be available for student loans.

Since most creditors will be unable to use wage garnishment, they may instead pursue a writ of attachment against a debtor. In these cases, they will seek to “freeze” a person’s bank account(s), preventing them from making withdrawals or transfers. They may then look to seize some or all of the funds in an account in order to cover the debts that are owed. 

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Schertz Chapter 7 Bankruptcy LawyerMost Americans owe debts in some form. While these debts are manageable in many cases, unexpected financial difficulties or other issues may make it difficult or impossible to repay the debts a person owes. Bankruptcy can offer debt relief in these cases, and for some debtors, Chapter 7 bankruptcy is the ideal option, and it will allow most types of debts to be discharged after certain types of assets are liquidated. However, to qualify for Chapter 7 bankruptcy, a person will need to pass a means test.

Income and Expenses Considered in the Means Test

The means test is meant to prevent abuse of the bankruptcy laws, and it limits the ability to file for Chapter 7 bankruptcy to those who have limited disposable income that would allow them to repay the debts they owe. The means test consists of two parts. The first part examines a person’s income and compares it to the median income in their state. A debtor will be required to report all sources of income, including their gross wages or salary, bonuses, commissions, income earned through businesses or real estate properties, unemployment compensation, and retirement/pension benefits. If the total amount of a debtor’s income is below the median income for their state, they will qualify for Chapter 7 bankruptcy.

In Texas, the median annual income for bankruptcy cases filed after May 15, 2021 is as follows:

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Schertz Bankruptcy AttorneyThere are many forms of financial hardship that can affect a person or family. The loss of a job may cause a person to be unable to pay certain bills, or a serious injury or illness may not only result in a reduction of income, but a family may also have large medical bills. In these situations or other cases where a person is unable to pay the debts they owe, bankruptcy can provide much-needed relief, eliminating certain types of debts and providing a family with a fresh start. However, a person may be concerned about how bankruptcy will affect their life and finances, including whether they will be able to continue owning their car.

Bankruptcy, Auto Loans, and Exemptions

Whether a person will be able to keep their car during and after bankruptcy will depend on the type of bankruptcy case, whether they have defaulted on their auto loan, and other factors. If a person still owes money on their auto loan, and they are unable to make payments, they may be able to discharge this debt through bankruptcy, but in these cases, the lender will most likely repossess the car. 

A person may be able to avoid repossession by repaying a defaulted loan through Chapter 13 bankruptcy. In this type of bankruptcy, the past-due amount and any penalties may be grouped together with other debts into a repayment plan. If the debtor makes all payments in the plan, which will last from three to five years, while also remaining current on their car loan payments, they will be able to maintain ownership of the vehicle. Chapter 13 bankruptcy may also allow for a “cramdown” of an auto loan. In these cases, the amount of the loan may be reduced to the amount that the vehicle is actually worth.

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Schertz Bankruptcy AttorneyYour credit score is an important figure that can play a role in multiple different areas of your life. A low credit score could affect your ability to obtain a loan such as a home mortgage, and your credit report may also play a role in issues such as housing or employment. If you are considering bankruptcy, you may be concerned about how it would affect your credit score. Fortunately, if you do receive debt relief through bankruptcy, this can provide you with the ability to begin rebuilding your credit, allowing you to pursue opportunities in the future.

How Bankruptcy Affects Your Credit Score

Bankruptcy will cause your credit score to decrease significantly, and having a bankruptcy on your credit report may be an indication to creditors that you may not qualify for certain types of loans. However, if you are considering bankruptcy, you are likely already struggling with debt, and missing payments on loans, credit cards, or other bills will also decrease your credit score. Ultimately, it may be more beneficial to go ahead with bankruptcy and then take steps to build your credit score back up once you have regained financial stability.

Ways You May Be Able to Increase Your Credit Score

Following bankruptcy, the best ways to improve your credit rating involve demonstrating that you are financially responsible. You can do so by making sure you consistently pay all your bills on time. You can also make sure you are prepared for emergencies by building up your savings as much as possible and avoiding unnecessary purchases.

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