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Discharge and reaffirmation in Chapter 7 bankruptcy filings

Texas residents who are in debt might benefit from learning about the different benefits of filing Chapter 7 bankruptcy. This option is often referred to as the liquidation chapter of the U.S. Bankruptcy Code. Chapter 7 bankruptcy allows debtors to discharge the debts listed on their bankruptcy schedule. However, when a person files, a court appointed trustee is tasked with collecting and selling all non-exempt property belonging to the debtor.

A discharge can be described as a court order that relieves a consumer from the obligation to repay many of his or her debts. The debt that is not discharged by entering Chapter 7 bankruptcy includes child support, taxes, alimony, restitution or fines issued through courts and student loans. Expenses incurred by driving intoxicated or committing fraud are also disqualified from being discharged through a bankruptcy action. In addition, bankruptcy records may stay on the credit report for up to 10 years and could affect consumers' ability to secure future loans.

When filing bankruptcy, creditors may request that debtors reaffirm, or repay, certain debts that could otherwise be discharged. Some debtors enter this legally enforceable agreement of repayment based on their own motives. Debtors and creditors typically need to submit reaffirmation documents within 60 days of their initial meeting, and entering into these agreements is voluntary for debtors. If the debtor fails to uphold a reaffirmation agreement, a creditor may take legal action to recover the debt. However, reaffirmation agreements cannot be designed in such a way that creates an undue-burden on the debtor or any dependents.

Debtors who need help evaluating bankruptcy law typically benefit from consulting legal representation. Bankruptcy lawyers may be able to help debtors choose the most advantageous option for their particular situation. These lawyers might also be effective in protecting debtors from creditor harassment and wage garnishment as well.

Source: Southern District of Texas, "Forms, Fees & Rules", September 19, 2014

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