Even in a flourishing economy, an individual can face a financial crisis as the result of a loss of a job, a serious illness or injury, or a personal issue such as divorce. In recent years, however, the entire country has faced a financial crisis that has left millions of people facing mounting debt with little light at the end of the proverbial tunnel. If you are one of those people, bankruptcy may be your best option. Once you have made the decision to explore the bankruptcy option, you need to consult with an experienced bankruptcy attorney to decide which bankruptcy chapter is best for you.
Individuals may file for protection under Chapter 7, 11, 12, or 13 of the U.S. Bankruptcy Code; however, Chapters 7 and 13 are the most commonly used. Chapter 11 is more frequently used by small businesses and Chapter 12 is used solely for family fisherman or farmers.
Chapter 7 is the best option for an individual to consider if they need bankruptcy relief. A Chapter 7 bankruptcy only lasts about four months, your wages are not garnished and, because of Texas’ strong exemption laws, most debtors filing Chapter 7 keep all of their assets. Many individuals believe that they make too much money to file a Chapter 7 case or that their assets will be “liquidated” if they file a Chapter 7 bankruptcy case. This is simply not true. Only in the rarest of cases do Central Texans have an income problem making a Chapter 7 bankruptcy case, not an option.
A Chapter 13 Bankruptcy case is a three to five-year wage garnishment. You ask the Bankruptcy Court to garnish your wages for this lengthy period of time to repay your creditors. You are actually in an active bankruptcy case for three to five years. You are not able to purchase a car or a home during that entire period and you can not even begin to work on restoring your credit until the three to five-year bankruptcy case is over. I, therefore, believe that Chapter 13 bankruptcy should be considered as an option only sparingly.
If you have consulted with an attorney who has informed you that Chapter 13 bankruptcy is your only option, please see me for a second opinion! Erin Shank has been practicing exclusively bankruptcy in Texas for over three decades and will work to see if an alternative, other than a three to five-year wage garnishment, can help you address your financial problems.