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When Parents of Minors File for Bankruptcy
When an individual or a married couple is struggling with debt, their response to the situation often impacts others as well. Most urgently, debt challenges tend to affect everyone who lives under the same roof as a debtor. Meaning, if someone is struggling with debt significantly enough that they are considering filing for bankruptcy, their circumstances almost certainly affect any minor children who reside with them. Sometimes, the benefits that bankruptcy can provide children serve as powerful motivations for parents to weather the complexities of the process with grace and determination.
Stability and Stress Reduction
It is not a secret that children crave stability. A child’s sense of whether or not the fundamental structure of their home life is stable can affect everything from their health to their academics. Additionally, if instability remains a driving force in a child’s life for too long, the effects of that reality can ripple all the way into adulthood and even into the next generation’s experience of the world. Similarly, when a child’s home life is unusually stressful – perhaps because a parent is working far too hard and getting far too little sleep as they struggle to catch up on past-due bills – that challenge can impact a child’s well-being profoundly as well.
Will My Car Loan Be Discharged if I File for Chapter 7 Bankruptcy in Texas?
One of the main reasons why individuals start researching the bankruptcy process is that some of their property is at risk of being seized by a creditor. Mortgage lenders may threaten foreclosure, while car dealerships and other retailers of valuable assets paid off via installment contracts may threaten repossession. While the primary benefit of filing for Chapter 7 bankruptcy is usually securing a discharge of eligible debt balances, halting collections actions such as the repossession of a vehicle can also have a meaningful impact on a filer’s financial well-being.
Unfortunately, some filers are under the impression that bankruptcy results in both the end of collections actions of all kinds and the discharge of all kinds of debts. But, just as some collections actions – including those involving overdue child support – are not subject to the restrictions of the automatic stay, some debt balances cannot be discharged outright as a result of the bankruptcy process.
Are You Concerned About Bankruptcy Stigma?
In 2008, the housing market cratered, the banking system was teetering on the verge of collapse, and the economy slowed to a crawl. As a result, millions of Americans lost their jobs and many lost their homes. There was much discussion of why Wall Street was receiving bailouts when Main Street was struggling to keep going, day after day.
This consequential period in American history served as a wake-up call for many who had long-held negative views about the bankruptcy process. After watching massive corporations receive assistance from the government in order to remain afloat while hard-working friends, family, and neighbors were forced from their homes and struggled to buy groceries, a perceptible shift in public attitudes concerning the personal bankruptcy process occurred. What had long been viewed as an abdication of responsibility was now largely perceived as a lifeline for those who had - by and large – suffered hardship through no fault of their own.
What Is a Creditor Matrix?
When an individual files for bankruptcy, the court notifies their creditors of this legal action. The court takes this step partially to protect creditors’ interests and partially to ensure that the filer can benefit from the protection of the automatic stay. In order to effectively notify a filer’s creditors of their decision to pursue a bankruptcy case, the court needs accurate information to identify each creditor and to contact them. This is where a creditor matrix comes into play.
Preparing a Creditor Matrix
A creditor matrix is, essentially, a list of a bankruptcy filer’s creditors presented in a very specific fashion. Each bankruptcy district across the country requires that this information be presented in particular ways. For example, the Western District of Texas – which is where filers from San Antonio and surrounding communities file their cases – has published a full page of instructions concerning how a filer’s creditor matrix should be crafted. From the size of the margins to the capitalization of every word, this sheet of instructions is highly detailed.
Which Assets Are Exempt in a Chapter 7 Texas Bankruptcy Case?
One of the primary reasons why many individuals are hesitant to file for bankruptcy is that they have heard that benefitting from the bankruptcy process will result in the loss of all of their personal property. This myth is likely grounded in the fact that Chapter 7 bankruptcy is referred to as “liquidation” bankruptcy.
It is important to understand that this nickname is misleading when it comes to personal bankruptcy. Companies that file for business bankruptcy must generally liquidate their assets in order to benefit from the protection afforded by the court. However, very few individuals who file for personal bankruptcy under Chapter 7 of the U.S. Bankruptcy Code lose any of their personal property as a result of the process. Instead, their property is generally protected from sale by the trustee assigned to their case via state or federal exemptions.
Exemptions: The Basics
Exemptions insulate specific property from the risk of being sold by the trustee assigned to one’s bankruptcy case. Both the state and federal schemes offer broad exemptions that cover virtually all non-luxury property that most low-income Chapter 7 filers tend to own. As a result, it has been widely reported that approximately 95% of all Chapter 7 filers do not have any of their property sold as part of the bankruptcy process.
What Exactly Is Bankruptcy?
If you are struggling with overwhelming debt, you may have been encouraged to start researching what filing for bankruptcy entails. Yet, it does not make much sense to begin researching the ins and outs of the bankruptcy process until you have a strong sense of exactly what bankruptcy is and whether this opportunity may benefit your situation uniquely.
Bankruptcy Is a Form of Debt Relief
The two primary forms of personal bankruptcy that are widely available to adults living throughout the U.S. are Chapter 7 bankruptcy and Chapter 13 bankruptcy. At the end of each successful bankruptcy case – regardless of the chapter type involved – a filer’s qualifying unsecured debts will be discharged by the court.
When a discharge is entered for a specific debt, like a credit card balance or a medical bills account, the filer is absolved of responsibility for that debt. As a result, no creditor can ever seek repayment for it again. It is this absolute form of debt relief that makes navigating the complexities of the bankruptcy process worth many filers’ time and energy.
Signs That It Is Time to Start Thinking About Filing for Bankruptcy
If you are struggling to make consistent payments on your debt-related financial obligations, you may or may not be in a position to benefit significantly from filing for bankruptcy. Certain bankruptcy alternatives are preferable for debtors who are facing unique circumstances, such as struggling to repay a single account. But, generally speaking, if you are unable to consistently repay multiple accounts, your wages are being garnished, you are risking repossession or foreclosure, or you simply cannot sleep at night due to debt-related stress, it may be time to start thinking about filing for bankruptcy.
There are numerous reasons why your financial situation may benefit significantly from the bankruptcy process. Overwhelming debt can lead to relationship strain, poor work performance, and a host of other challenges that color virtually every aspect of someone’s life. If your debt has become the most urgent aspect of your finances, chances are good that you could benefit from filing for bankruptcy.
If You Qualify for Chapter 7 Relief, There Are Still Reasons to Consider Chapter 13 Instead
The two primary forms of personal bankruptcy that are widely available across the U.S. are Chapter 7 and Chapter 13 bankruptcy. Regardless of which type you are thinking about filing, you will benefit from a discharge of your qualifying debts at the end of a successful bankruptcy process. You will also benefit from the protection afforded by the automatic stay in either scenario.
Yet, there are distinctions between these two forms of bankruptcy that every potential filer should be aware of. You may have heard that if you qualify for Chapter 7 bankruptcy you should embrace this opportunity because it allows for a quick discharge of debts without a repayment plan. However, there are some reasons why even low-wage earners who are eligible for Chapter 7 may want to file for Chapter 13 bankruptcy instead.
Why Consider Chapter 13 Bankruptcy?
There are two primary reasons why a filer who is eligible for a Chapter 7 discharge may want to consider Chapter 13 relief as a superior alternative.
Bankruptcy: Credit Counseling and Education Course Requirements
If you choose to file for bankruptcy, an attorney can complete most of the "heavy lifting" legal tasks associated with this process on your behalf. However, there are a few items on any bankruptcy to-do list that can only be completed by individual filers.
For example, you will be required to complete both a pre-bankruptcy credit counseling course and a pre-discharge debtor education course as elements of your bankruptcy filing. While an attorney can advise you regarding when you should complete each mandatory course, how to sign up for each course, and what you may want to pay particular attention to while participating, you will ultimately be responsible for accomplishing these steps in the bankruptcy process.
Pre-Bankruptcy Credit Counseling
It is easy to think about a bankruptcy case truly beginning when someone files their initial bankruptcy paperwork with the court. After all, that is when the protection of the automatic stay kicks in and the court begins considering the merits of a filer’s petition.
Filing for Bankruptcy to Address Medical Debt
The federal Consumer Finance Protection Bureau (CFPB) recently released alarming statistics related to the amount of medical debt that Americans are struggling to repay. In all, adults in the U.S. owed a minimum of $88 billion in medical debt as of June 2021.
The agency clarified that the actual medical debt burden plaguing American families is likely much higher, as this statistic was gleaned from analysis of consumer credit records and not all medical debt is reported to credit agencies.
If your struggle to repay medical debt is compromising your ability to repay other debts and to make ends meet, you are not alone. Thankfully, there are some debt relief opportunities available to you at this time. While filing for bankruptcy is not the only way to manage burdensome medical debt, it is worth noting that this is the primary financial obligation cited by adults in the U.S. as the reason why they have chosen to file for bankruptcy.
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