Choosing to go into bankruptcy is not typically the option that debtors in Texas want, but it is often the only route to begin liquidating their debts and start a new financial life. Those about to file for the first time may want to know what the most common bankruptcy is.
Chapter 7 bankruptcy
The most common type of bankruptcy filed is Chapter 7. Bankruptcy law for Chapter 7 states that a liquidation must occur to relieve a person’s debts. The number of individuals filing for this type of bankruptcy has grown steadily since 2005 and surged in 2008 during the U.S. economic downturn. Chapter 7 bankruptcy:
- Is common among lower-income debtors
- Has half of the filings made by individuals with high school or some college as their highest education
- Is most commonly filed due to loss of income
What happens during Chapter 7 bankruptcy?
After you file for Chapter 7, your assets go through liquidation to pay back what you owe. However, the process is a little more complicated than simply selling your belongings. Assets such as your home and family car are things that have a high value but are also items that you need to survive. What happens to them during Chapter 7? Fortunately, assets such as your home and family car are needed to live a comfortable and productive life, so they are considered exempt assets. These items are not typically sold by the courts during your bankruptcy. Only non-exempt assets such as additional real estate property are allowed to be liquidated.
Filing for bankruptcy is never an easy process to go through. Several legal and emotional obstacles are going to pop up, so you may want an attorney at your side. An attorney experienced in bankruptcy laws may provide you with the best possible path forward for yourself and your family.