Learn More About Bankruptcy

The term bankruptcy encompasses a large number of federal and state laws that apply to debtors with either large or small debts. Bankruptcy laws are designed to provide debt relief to individuals who cannot pay their creditors. Bankruptcy laws provide an orderly process for the liquidation of assets and discharge of debts. There are two main types of bankruptcy:

Chapter 7 bankruptcy

If you are facing foreclosure or have stopped making mortgage payments, Chapter 7 bankruptcy may provide an opportunity to save your home. A Chapter 7 bankruptcy may eliminate enough of your debt to make it possible for you to return to the mortgage market. Your bankruptcy attorney can help you review your finances and determine whether a Chapter 7 bankruptcy may be a good option for you.

Chapter 13 bankruptcy

A Chapter 13 bankruptcy is a way to stop foreclosure on your home. It does this by creating a 3– to 5–year repayment plan that pays some of your mortgage debt to your lender and includes a payment to a trustee to establish a fund for future payments. The plan is approved by the bankruptcy court, which then creates a repayment plan that is in effect for three to five years. During that period, your payments are made to the court–appointed trustee. If you make all the required payments to the trustee, the trustee sends the payments to the lender to pay off your home loan. If you fail to make the payments for any reason, your home will be subject to foreclosure. Chapter 13 bankruptcy is not available to you if you are behind on your mortgage payments and are facing foreclosure. Chapter 13 bankruptcy may also be an option if you are behind on your mortgage payments and you have other assets you would like to protect. Chapter 13 bankruptcy allows you to keep your home and pay your mortgage debt over time. In Chapter 13 bankruptcy, you pay the trustee, who in turn pays your lender. If you cannot keep up with your payments under the repayment plan, you will be in default and your lender may foreclose on your home.

Your Dallas bankruptcy attorney can explain the bankruptcy laws and help you determine whether Chapter 13 bankruptcy is right for you. There are also eligibility requirements that vary from state to state. This includes the amount of debt you owe, the amount you earn, and the amount you own. It is important to understand your options before filing a petition.