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A brief comparison of Chapter 7 and Chapter 13 bankruptcy

For some Texas residents, bankruptcy protection may be the only answer for debt relief. However, the question of which type of bankruptcy to file can be difficult due to the differences between them.

Deciding on which type of bankruptcy to file can depend on a number of factors. The most important has to do with the income requirements for Chapter 7. If the person does not meet the means test, generally confirming that their income is below the state median, they will not qualify for Chapter 7. If they do, they can take advantage of a quicker turnaround on their debt discharge. They must also go through pre-bankruptcy credit counseling in the 180 days before they file. In exchange for the debt discharge, any assets owned by the person that do not meet certain exemptions will be surrendered to creditors in order to pay off the debts.

In order to qualify for Chapter 13 bankruptcy, however, the important factor is the amount of debt that the person has. Their total unsecured and secured debts must be below a certain level, or $307,675 and $922,975, respectively. The person will then enter into a payment plan of up to five years. After this payment plan is successfully completed, the person will no longer be liable for any debts discharged by court order in the bankruptcy.

Understanding the particular type of bankruptcy that is right for each person can be difficult without the assistance of a bankruptcy law attorney. The attorney may be able to work with the person to come up with a debt relief plan that could include filing for bankruptcy. This can help to eliminate debt and stop the repossession of that person's property or the foreclosure of their home.

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