Bankruptcy can help both people and businesses who are struggling with debt to find relief. Filing for bankruptcy can offer specific advantages and can be the perfect way to manage overwhelming financial burdens by restructuring payments or even eliminating certain debts. It’s not right for everyone, and it can be quite a complex process, but a bankruptcy attorney in Sherman, TX can help you discover if the benefits of this process make it right for you.
From a Bankruptcy Attorney in Sherman, TX: What Are the Benefits of Filing for Bankruptcy?
Protection from Creditors
The fastest benefit of filing for bankruptcy is the automatic stay. As soon as you file, courts issue an order that stops creditors from harassing you, attempting to collect debts, or taking legal action like filing a lawsuit or applying for wage garnishment. This gives you space and time to reorganize your finances without the constant pressure from creditors.
It also allows you some time to explore options, and this protection applies whether you file for Chapter 7 or Chapter 13 bankruptcy. Even if you ultimately have to pay off a lot of the debt over time in structured payments, just having this space to think things through with your lawyer relieves a lot of stress and allows you to think more clearly about the future and how to manage it.
Keeping Your Property Through Texas Exemptions
Texas has generous exemption laws that allow you to protect certain assets during bankruptcy. Exemptions specify in law exactly what property you can keep when you’re filing for Chapter 7 bankruptcy, and this is important because Chapter 7 requires you to liquidate assets to pay creditors. In Texas, you can choose between taking either the state or the federal exemptions when you file, but Texas’ exemptions are usually the more favorable.
For instance, Texas offers a homestead exemption that protects your primary residence, regardless of its value, as long as the property is 10 acres or less in a city or 100 acres (200 for families) in a rural area. This means you can often keep your home. You can also keep some vehicles (depending on value and relative to the number of drivers in the home). You can also exempt personal property, such as household goods, jewelry, or tools of your trade, up to a combined value of $50,000 for individuals or $100,000 for families.
Discharging Unsecured Debts
Filing for Chapter 7 bankruptcy in Texas can allow you to discharge some of your unsecured debts, such as credit card balances, medical bills, or personal loans. “Unsecured” debt is debt that isn’t backed by a collateral or assets; “secured” debt is the debt you owe on assets that you can surrender in exchange for payment of the debt if necessary, like a home mortgage or a car loan.
“Discharge” means you’re no longer legally obligated to pay a debt, and this is especially helpful if you’re drowning in high-interest credit card debt or unexpected medical expenses. However, not all debts are dischargeable: student loans, child support, and most taxes typically can’t be discharged during a bankruptcy. Still, eliminating unsecured debts can make a huge difference to your overall financial burden and make it possible for you to meet your other obligations.
Reorganizing Debt with Chapter 13
For those who don’t qualify for Chapter 7 or who want to keep more assets, Chapter 13 bankruptcy allows you to use a structured repayment plan to deal with your debt. Once you have a manageable plan, which is typically set up to be repaid over three to five years, you make monthly payments to a trustee who then distributes these funds to your creditors.
This can prevent a mortgage foreclosure or car repossession by letting you catch up on missed payments over time. At the end of the plan, any remaining unsecured debts may even be discharged. Chapter 13 is usually best for people with steady income who just need some time and relief to reorganize their finances.
Rebuilding Credit Over Time
Bankruptcy undoubtedly has a negative impact on your credit score in the short term, but it’s not permanent. Chapter 7 bankruptcy stays on your credit report for 10 years, while Chapter 13 remains for seven. That’s the bad news: the good news is that the fresh start you get from debt relief allows you to begin rebuilding your credit quickly. If you’re able to make regular, timely payments on remaining debts and use secured credit cards responsibly, you can gradually improve your credit. Many people find that it only takes a few years to qualify for loans or credit cards again.
Emotional and Financial Relief
The stress of unmanageable debt can take a huge toll on your mental health and relationships, and it’s important to think about whether bankruptcy might be a help in these areas. Filing can provide you with emotional relief by removing the constant worry of creditor calls or legal threats. The process also offers you a clear path forward for your financial future, which offers peace of mind, and knowing you have legal protections and a plan to address debt can restore a sense of control. Since bankruptcy frees up income that you were previously spending on high-interest debt, you can now focus on building your savings, buying essentials, or rebuilding your future.
Preventing Utility Shutoffs
Another benefit of filing for bankruptcy in Texas is getting protection against utility shutoffs. The automatic stay prevents the utility companies, like electric or water providers, from disconnecting your services for unpaid bills for at least 20 days. During this period, you can work out a plan to pay your current utility costs, and in some cases, past-due amounts can be included in a Chapter 13 repayment plan.
Protection for Co-Signers in Chapter 13
If someone co-signed a loan for you, like a car or personal loan, filing for Chapter 13 can protect them from creditor actions. When you file, the automatic stay extends to any co-signers in addition to you as the person applying for bankruptcy, and creditors can’t pursue either of you for payment while the repayment plan is active. This is called a co-debtor stay. It gives you time to repay the debt through your Chapter 13 plan without putting your co-signer’s finances at risk and is especially valuable if a family member or friend helped you secure a loan and could face financial strain if your creditors demand payment from them.
Avoiding Wage Garnishment
Wage garnishment can make it hard to cover basic expenses. Filing for bankruptcy stops some types of wage garnishment immediately through the automatic stay. However, bear in mind that garnishments for child support, alimony, or certain taxes may continue. By halting other garnishments, though, you’re more likely to have the income you need for essentials and those garnishments that can’t be avoided. For Chapter 13 filers, any garnished funds may still be owed and are often included in the repayment plan. This means that while your wages won’t be garnished for them any longer, the payments are still due (though they’re now spread out over time).
Bankruptcy is a great choice for some people, but not for everyone. To learn more about what’s best for your situation, contact the Pelley Law Office LLP in Sherman, Plano, or Dallas today for a free consultation.
Contact Our Texas Bankruptcy Law Firm For Help Today
If you’re facing bankruptcy in Texas, we’re here to help. Contact the experienced bankruptcy lawyers at Pelley Law Office, L.L.P., today to schedule a free consultation.
We proudly serve Plano, Dallas, Sherman, and the surrounding areas.
Pelley Law Office L.L.P. – Plano Office
Address: 1312 14th St, Plano, TX 75074
Phone: (972) 608-0335
Hours: 24/7
Our firm is located near you. Find us with our GeoCoordinates: 33.0180322,-96.6952916,863
Pelley Law Office L.L.P. – Sherman Office
Address: 905 N Travis St, Sherman, TX 75090
Phone: (903) 813-4778
Hours: 24/7
Our firm is located near you. Find us with our GeoCoordinates: 33.6445846,-96.6113141,857
