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Why You Should Hire an Attorney to Handle Your Bankruptcy
Bankruptcy can be a complex and overwhelming process for any individual to have to go through. While it may be tempting to navigate the process alone, hiring an attorney is almost always a wise decision. Therefore, it is essential to understand why hiring an attorney is essential when going through bankruptcy proceedings. With proper legal guidance, you can confidently get through this challenging process.
Experience Matters
In so many areas of law, experience is an important trait for an attorney to possess, especially when it comes to bankruptcy. Bankruptcy law is intricate and constantly evolving. Hiring an attorney with ample experience ensures that you will have access to their years of experience in handling similar cases. They understand the nuances of the law's potential pitfalls and can guide you through the entire process, making it less stressful and more efficient.
The Impact of Bankruptcy on Your Credit Score in Texas
Filing for bankruptcy in Texas can provide critical financial relief when you are buried in unsustainable debt. However, it also inevitably affects your credit score and report. Here is a look at how different types of bankruptcy filings can impact your credit in Texas, both short and long term and how an attorney can help.
The Immediate Credit Score Drop from Bankruptcy
Your credit score will decrease significantly in the months immediately following either a Chapter 7 or Chapter 13 bankruptcy filing in Texas. This happens for several reasons. First, all accounts included in the bankruptcy will be closed or marked with a negative status, subtracting from your credit mix. Your credit utilization ratio will suddenly jump since your total limits decrease while balances owed may remain similar pre-filing.
Can Filing Bankruptcy Stop Wage Garnishment in Texas?
Few financial situations feel more stressful or overwhelming than having your hard-earned wages garnished by creditors. However, filing for bankruptcy in Texas may stop ongoing wage garnishments in their tracks while also permanently eliminating the underlying debt through discharge so you can recover and regain financial stability. Here is an extensive look at how declaring bankruptcy with a lawyer can halt creditor wage garnishment.
How Bankruptcy’s Automatic Stay Stops Collections
When you file a Chapter 7 or Chapter 13 bankruptcy petition in Texas, an "automatic stay" will go into effect immediately under federal law. This triggers a broad legal injunction that prohibits any continued garnishment of your wages and halts all collection activity against you. The automatic stay specifically prevents creditors and collectors from pursuing repossession of property, foreclosure of homes, disconnection of utilities, civil litigation against you, or any other debt collection activities. They cannot legally garnish your wages or bank accounts after you file bankruptcy without getting the stay lifted.
How Bankruptcy Impacts Student Loans in Texas
Student loans are notoriously difficult to discharge in bankruptcy. The specific impact bankruptcy can have on student loan debt often depends on the loan type and bankruptcy chapter. Here is a more in-depth look at how different student loans are treated in bankruptcy cases. For more detailed information, contact a Texas bankruptcy attorney.
Federal Student Loan Dischargeability
Most federal student loans, including Stafford, PLUS, and Perkins loans, cannot be discharged through bankruptcy in Texas. These loans fall under the U.S. Bankruptcy Code's "undue hardship" provision. To prove undue hardship and attempt federal student loan discharge, you must file an adversarial proceeding in bankruptcy court against the lender and prove:
When Are Chapter 7 Cases Subject to a Presumption of Abuse?
Not everyone qualifies for Chapter 7 bankruptcy. Only individuals and married couples who do not earn much income are eligible for this kind of debt relief. Meeting the income limits for Chapter 7 bankruptcy is also known as “passing the Chapter 7 means test.” If someone files for Chapter 7 bankruptcy but does not pass this means test, their case will likely be dismissed due to the court’s presumption of abuse. This is why it is important to have a Texas bankruptcy lawyer assist you with your case.
How Can a Filer Abuse the Chapter 7 Process?
Unlike Chapter 13 bankruptcy – which requires filers to stick to a repayment plan for three to five years – Chapter 7 bankruptcy filers do not have to repay their creditors before their qualifying unsecured debts can be discharged. Because creditors have rights too, the courts reserve the extreme benefits of Chapter 7 bankruptcy for low-wage earners who are unlikely to be able to repay their debts anytime soon.
What Bankruptcy Filers Can Learn from the Navient Settlement
Most of the time, when consumers confront Big Business and Big Finance, courageous consumers may benefit from being featured in informative news coverage – which can help to highlight their struggles and allow similarly-situated individuals to understand that they are not alone – but they do not tend to come out on top. Yet, there are times when "the little guy" triumphs, and these wins should not be understated. For example, abuses against numerous bankruptcy filers – who are ordinarily protected by the automatic stay and the discharge of their qualifying debts – were recently addressed in a big way when Navient settled with a number of filers for $198 million.
The Settlement
Navient Corp. is a private student loan provider. When many of its borrowers were confused as to why Navient Corp. kept collecting on their debt, despite the fact that their debt with the company was discharged in bankruptcy, the borrowers sought legal assistance. Ultimately, they realized that Navient was falsely claiming that the debt had not been discharged and that the company was unlawfully collecting on debts that were no longer the borrowers' responsibility.
How a Chapter 13 Bankruptcy Can Help Save Your Home
For homeowners facing the possibility of foreclosure, Chapter 13 bankruptcy is a potential lifeline. This debt reorganization plan offers a fresh chance to regain control of your financial situation and safeguard your home from repossession. If you are in danger of losing your home, exploring Chapter 13 bankruptcy could be the solution you have been seeking.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy presents a structured strategy for debt repayment. Spanning a period of three to five years, this plan enables you to create a practical repayment schedule, encompassing all your creditors, including your mortgage lender. As an advantage, your monthly payments are determined based on your income and expenses, making them more manageable.
After completing your Chapter 13 bankruptcy plan, outstanding balances for certain debts may be discharged as long as certain criteria have been met, including meeting all domestic support obligations and the completion of an approved financial management course. There are some debts that cannot be discharged, including home mortgages, child support and alimony debt, certain taxes, student loans, and more.
How Long Does a Bankruptcy Automatic Stay Remain in Effect?
One of the primary reasons that individuals choose to file for bankruptcy is that filing a case in bankruptcy court initiates an automatic stay. Once the automatic stay is in place, most collection activity – including wage garnishment, creditor lawsuits, repossessions, and foreclosure actions – must cease until a filer’s bankruptcy case is resolved or the court grants a creditor-specific allowance to bypass the restrictions of the automatic stay. As a result, while the benefits of the automatic stay are undeniable, filers cannot count on them to last forever.
Taking Advantage of the Stay: Chapter 7
Most successful Chapter 7 bankruptcy cases are resolved in a matter of months. As a result, the automatic stay only tends to function as a short “pause” button on creditor action for Chapter 7 filers. Meaning, once a filer’s eligible debt has been discharged at the conclusion of their case, the automatic stay will lift and any collection action that has not been resolved via discharge will resume.
Life After Bankruptcy: Learning from Detroit
When an individual files for bankruptcy, their focus naturally tends to remain on the urgent financial needs that prompted them to file for debt relief in the first place. They may have concerns about life after bankruptcy, yet, the very act of filing for Chapter 7 or Chapter 13 protection indicates that one’s financial situation is so dire that thinking ahead has become a luxury.
When the dust settles, a bankruptcy filer may start to focus more on both the temporary, negative consequences that their filing has inspired and on rebuilding their credit. It is at this phase of the bankruptcy process that learning from Detroit can come in handy.
Eating an Elephant
Ten years ago, Detroit, Michigan became the largest-ever city in the U.S. to file for bankruptcy. The city is now experiencing new growth and new opportunity but getting to this point was not an easy journey and that journey is not yet over. One building inspector described the experience of rebuilding and revitalizing the city as "We’re eating an elephant here," when interviewed by the New York Times.
Preparing for Your Chapter 7 Bankruptcy 341 Meeting of Creditors
Filing for Chapter 7 bankruptcy primarily involves filing detailed paperwork after ensuring the accuracy and completeness of all required documents. However, there are also a few unique requirements that involve filer participation in an experience. For example, there is both a pre-filing educational course requirement and a post-filing educational requirement. Additionally, each Chapter 7 filer is required to attend an interview referred to as a 341 Meeting of Creditors.
Setting Expectations
During your meeting, you will be asked questions about the information contained in your bankruptcy filing, your income, debts, property, and overall financial situation. Although it is rare that creditors choose to attend Chapter 7 341 meetings, you should be prepared to have one or more representatives of your creditors attend this conversation, as doing so is their prerogative. The meeting will likely only last about 15 or so minutes and will likely not last longer than a half hour. It will not occur in a courtroom but will instead, very likely, take place in a conference room.
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