As Texas residents may know, Chapter 13 bankruptcy allows an individual to reorganize debt and make payments on it over a three- to five-year period while retaining primary residence ownership. However, individuals may not be aware of recent changes in the law.
Chapter 13 allows an individual to discharge most debts, which prevents creditors from collection or other legal actions. Certain requirements are necessary in order to be eligible to file for this type of bankruptcy. An individual must not have discharged a bankruptcy under Chapter 13 in the previous two years or bankruptcy under Chapter 11, 12 or 7 in the preceding four years. Support obligations must be up to date, such as child support and alimony payments. In addition, the individual filing for Chapter 13 must complete a financial management course if such a course has been determined by the court to be available.
Certain types of debt cannot be discharged under Chapter 13. These include particular debts held long term, such as mortgages, most government taxes, civil judgment debts in cases associated with drug or alcohol-related accidents, benefit overpayments or loans for education, and criminal restitution.
Debts that may be discharged under Chapter 13 bankruptcy include property settlement debts incurred by separation or divorce and debts from misappropriation or fraud by a fiduciary. Debts incurred under false pretenses relating to property or money and civil debts for damages or restitution that caused the death or injury of another individual or damage to another individual's property are dischargeable as well.
An individual faced with overwhelming debt may benefit from consultation with an attorney. Bankruptcy law and items that are dischargeable under bankruptcy may be complex. An attorney may assist an individual by explaining what may be discharged and help that individual file the appropriate paperwork.