Texas residents who find themselves overwhelmed by financial obligations may be averse to filing for bankruptcy because of the presumed stigma it carries. They may not realize there are times when this form of debt relief may be the best thing they could do.
When debts or liabilities are significantly higher than assets and there is no chance they will ever be paid off, it may be time to consider filing for bankruptcy. Attempting to pay off such high debts may not leave enough money to pay for food or shelter. Debtors should always try to negotiate reduced payments with their creditors, but if creditors won't consider this, then bankruptcy again may be the only option. A bankruptcy trustee generally has more success in negotiating lower payments. Bankruptcy also is a viable option when consumers lose their jobs or rack up high medical expenses, which slices their income and reduces their ability to pay bills.
Bankruptcy does have its negative side. People's credit ratings may drop significantly and the bankruptcy filing remains on their credit records for seven to 10 years. Consumers also may find it difficult to buy a house or car or get new credit of any kind for many years.
There are two main types of bankruptcy available to debtors. Briefly, Chapter 7 involves the liquidation of a debtor's non-exempt assets to pay creditors, while debts are repaid pursuant to a court-approved structured payment plan under Chapter 13. Texas consumers may wish to discuss their financial woes with a bankruptcy law attorney who may be able to advise them on the debt relief program that is best for them.