Bankruptcy is a program established by our government to ensure that Americans never get into endless debt and to give Americans a way to get out of debt and start over. There are two types of personal bankruptcy: Chapter 7 and Chapter 13.

In bankruptcy, you are formally asking the court to give you protection from your creditors and force your creditors to stop harassing you and allow you some breathing time to make decisions on what to do about your debt. Then, if practical and possible, to allow you to eliminate the debt forever.

History of bankruptcy. Bankruptcy has a long tradition in the history of Western civilization. It started in the Bible in the Old Testament Book of Deuteronomy 15:1-2

Chapter 7

Chapter 7 is the preferable choice for consumer debt because in a Chapter 7 you are allowed to bankrupt all your unsecured debts (credit cards, medical bills, judgments, repossessions, foreclosures, unpaid personal loans, and many more). You can also bankrupt some IRS income taxes. Even though you are bankrupting your debt, you still can choose whether or not to keep your secured debts and continue to pay them (house, cars, furniture, etc.). When you file a Chapter 7, you can keep most of your assets including your pension and retirement plans, your house, your car, your furniture, and your personal possessions. For a complete itemization of what you are allowed to keep and still bankrupt all your debts using TX bankruptcy exemptions, see Tx. Prop Code 42.001

You must qualify in order to file a Chapter 7. To qualify, your income has to be within a certain range, depending on the size of your family, and your monthly debt and expenses have to be more than your monthly income. There is no magic number, however. It totally depends on your individual income, expenses, and assets. Your ability to file a Chapter 7 depends on many different factors. This is one reason your attorney must know how to calculate your true income and your true expenses for purposes of qualifying for a chapter 7. Our experience is that most people who really need to file bankruptcy do qualify to file some kind of bankruptcy. If you want to know if you qualify to resolve your debt issues in bankruptcy, just click the button below.

Chapter 13

If you do not qualify for a Chapter 7 because your income is too high or your expenses too low or because some of your debt is not dischargeable (some taxes), then you still have Chapter 13 available. Chapter 13 is also recommended as a way to partially pay back debt which cannot be discharged in a Chapter 7, such as certain taxes, or as a way to pay back arrearages on mortgages and/or car payments, when you are keeping your home or saving it from foreclosure. Simply put, a Chapter 13 is a bill consolidation program. You will partially pay back your creditors based your income and expenses and the nature of the debt, for a time period of three to five years. Unsecured creditors get a prorated payout but are considered paid in full. I do not do chapter 13 bankruptcies.

You must qualify in order to file a Chapter 7. To qualify, your income has to be within a certain range, depending on the size of your family, and your monthly debt and expenses have to be more than your monthly income. There is no magic number, however. It totally depends on your individual income, expenses, and assets. Your ability to file a Chapter 7 depends on many different factors. This is one reason your attorney must know how to calculate your true income and your true expenses for purposes of qualifying for a chapter 7. Our experience is that most people who really need to file bankruptcy do qualify to file some kind of bankruptcy. If you want to know if you qualify to resolve your debt issues in bankruptcy, just click the button below.

Our usual attorney’s fee for a Chapter 7 bankruptcy is $1,150.00. This could be more if you have special issues which require additional time and attorney’s work to accomplish. In addition, there is a Federal Court filing fee of $299.00 and a credit report fee of $40.00 to $70.00 depending on marital status. Clients have asked me why the attorney’s fee for chapter 7 bankruptcy varies between different attorneys. My best guess is that most attorney’s charge a flat fee for a chapter 7 regardless of the difficulty of the case. I do not do that. I charge less money if the case is not complicated, and most are not, and I also base my fee somewhat according to your income. Sometimes that makes my fee lower.

I also offer student, senior citizen, and veteran’s discounts.

All filers are required to take a pre-filing and post-filing bankruptcy class online. The cost is about $20.00 for each class. These classes are not affiliated with my law firm. Following is an example of the class you will need to take: www.debtorwise.com.

Chapter 7

We can file your petition immediately if you have a foreclosure to stop, or a creditor is suing you. From the date we file your petition, it takes only ninety days to complete your case! It can take longer if you have reaffirmations. After your case is closed you can start to rebuild your credit. We will show you the fastest and easiest way to rebuild your credit to where you can qualify for a home loan.

Chapter 13

It usually takes three to five years to complete a chapter 13 bankruptcy.

PLEASE DO NOT borrow from your retirement account, IRA, 401(k) or pension because it is the most valuable possession you have (other than possibly real estate). The reason this asset is so valuable is because it is exempt from collections and judgments, except certain kinds of taxes. Even if a collector got a judgment against you, it could not force you to give them this asset, so it is very protected. You can get good tax breaks if you withdraw it in accordance with the proper tax regulations. If you use this asset to pay off unsecured credit cards, medical bills or other debt, you have forever lost that exempt and untouchable asset and all you have gained is possibly some paid off unsecured debt (credit cards, medical bills). We have seen too many people borrow from their retirement account, pay off unsecured debt, and then end up having to file bankruptcy anyway. Remember, if you file a chapter 7 bankruptcy, and bankrupt your debt, you will still have your retirement. In this attorney’s opinion, there is no debt which would justify borrowing against your equity to pay off.

PLEASE DO NOT borrow against your equity. The reason this asset is so valuable is because it is exempt from collections and judgments, except certain kinds of taxes. Even if a collector got a judgment against you, it could not force you to give them this asset, so it is very protected. It is exempt as your homestead. It is your property. It is your legacy. The absolute last thing you should do is borrow money against your home to pay off other debt, regardless of what kind of debt it is. Remember, if you file a chapter 7 and bankrupt your debts, you will still have your home free and clear of the debts you bankrupted! In this attorney’s opinion, there is no debt which would justify borrowing against your equity to pay off.

Non-bankruptcy debt consolidation is when you hire someone specifically for the purpose of negotiating with your creditors and working out a pay out plan whereby you can pay off your creditors without filing bankruptcy.

In this attorney’s opinion, the only time debt consolidation really works to your advantage is when you have enough cash to make a cash upfront offer of settlement.

The problem is that the fee you pay for the service is equal to or more than a bankruptcy attorney’s fees. By the time you have accumulated the money and fees for the consolidation, you could have filed and completed a chapter 7 bankruptcy with money left over. In this attorney’s opinion, your credit score will not improve faster as a result of bill consolidation, so, it seems there is no real ‘upside” to bill consolidation compared with chapter 7 bankruptcy.

If you are interested in comparing your specific issues in a chapter 7 vs. non-bankruptcy debt consolidation, I will happy to make a comprehensive comparison for you.