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You are here: Home / FAQs / Why file for chapter 7 bankruptcy?

Why file for chapter 7 bankruptcy?

September 18, 2013
Written by Christopher Migliaccio

Business man holding a stack of papers and the top paper says bankruptcy chapter 7

One of the most common reasons a person will file for chapter 7 bankruptcy is to discharge insurmountable debts. This typically helps pave the way for a fresh financial start. Although there are several options available for declaring bankruptcy in Texas, many consumers opt for chapter 7 because of the specific advantages involved.

Debts Included in a Chapter 7 Bankruptcy Discharge

For instance, Chapter 7 is a viable option for someone who is experiencing financial hardship due to overwhelming debt. An example might include a single parent who has endured a health crisis and accrued medical and utility bills while being unable to earn income. Chapter 7 may offer someone in a similar situation with options to dig themselves out of an economic hole.

Notably, A chapter 7 bankruptcy filing will discharge – or wipe out – a wide range of debts. This may include: 

  • utility bills;
  • pay day loans; 
  • medical or hospital bills;
  • certain personal loans;
  • qualified credit cards;
  • the balance owed after a home foreclosure; and
  • the balance owed after a car repossession.

In some cases, a filer may also wipe out qualified back taxes. Filing bankruptcy does not discharge student loans, save for exceptional circumstances.  Chapter 7 and Chapter 13 differ because there is no financial cap on how much debt can be discharged in Chapter 7.

Protects a Debtor’s Personal Property 

Man sitting in the drivers seat of the car and he is in the process of closing the car door

Many debtors choose chapter 7 bankruptcy because it allows them to maintain most or all private property. There are exceptions, but generally speaking, many chapter 7 filers will not have to forfeit property or assets.

Texas Law Requires You to Forfeit or Sell Non-Exempt Property: 

  • valuable collections;
  • secondary homes or vehicles;
  • stocks and bonds; and
  • certain bank accounts.

Non-exempt properties can be used to pay off creditors. Many people who choose chapter 7 bankruptcy have few properties that qualify as non-exempt.

Items like: 

  • a home;
  • car;
  • pension; and
  • wages, are considered exempt and cannot be seized to pay off creditors.

Debtors are Truly Free and Clear of Past Debts 

Another common reason for filing chapter 7 bankruptcy – instead of chapter 13 – is that there is no required repayment plan. Those who file chapter 13 are given a payment plan that must be confirmed by a bankruptcy court. This plan may call for a 100 percent repayment of secured debts and anywhere from zero to 100 percent repayment of unsecured debts. Those who file chapter 7 are not obligated to repay any discharged debts.

An Option for Those with Pressing Financial Concerns 

Financial urgency is another reason a person may choose to file chapter 7 bankruptcy.  This process is generally much faster than other bankruptcy alternatives. In most cases, a bankruptcy court will discharge debts within 60 to 90 days of filing.  Afterward, creditors receive the distribution of non-exempt properties, if applicable, and then the court closes the case. It’s important to note that in the great majority of Chapter 7 bankruptcy cases, there are no non-exempt assets to distribute.

To learn more about reasons for filing for bankruptcy, contact Warren & Migliaccio. Call us at 888-584-9614.

Call (888) 584-9614 or click here to submit a consultation request form now.

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FAQ Category: Chapter 7 Bankruptcy

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If you need to speak with an attorney at Warren & Migliaccio, L.L.P.  submit our contact form below or call (888) 584-9614 to schedule a free consultation.

Christopher Migliaccio, attorney in Dallas, Texas
About the Author

Christopher Migliaccio is an attorney and a Co-Founding Partner of the law firm of Warren & Migliaccio, L.L.P. Chris is a native of New Jersey and landed in Texas after graduating from the Thomas M. Cooley School of Law in Lansing, Michigan. Chris has experience with personal bankruptcy, estate planning, family law, divorce, child custody, debt relief lawsuits, and personal injury. If you have any questions about this article, you can contact Chris by clicking here.

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