Filing Chapter 7 and Chapter 13 Consumer Bankruptcy on the Rise in US

June 21, 2010 - PRLog -- The questions being raised around the dinner table can range from how to scale back the summer vacation plans and who is going to be accountable for clipping coupons this week to which bills can go unpaid until next month and how to let your youngest child know that the plans to be present at her dream college requirements to be put on hold. What are the options available to an individual or a family that needs to see some improvement in their financial standing or else face dire penalty?

In a try to avoid a home foreclosure, many people try to sell their homes and seem for a new place to live with a lower rent or mortgage payment. But, with today's housing market, properties can have "For Sale" signs planted in their front yards for months before a concerned buyer is found. More and more debtors are turning to debt consolidation services, which assure on those daytime and late-night television ads to lower your monthly payments into one manageable fee. However, what if your circumstances are so desperate that these options will not be enough to ease your burden? As Texan debtors and others throughout the United States are deciding, filing for bankruptcy protection may be the best option in these worrying economic times.

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The fresh numbers concerning bankruptcy in our state show what is more and more becoming a harsh reality for our fellow Texans, particularly in Austin, Houston and San Antonio. Just in the first few months of 2009, court records indicate that approximately 2,672 bankruptcy cases have been filed in Houston. This number shows a 6.2% increase over the 2,515 cases that were filed during the same time period last year. The jump in filings in some of our other major cities is even more startling. In San Antonio, the bankruptcy filings for the first three months of 2009 totaled 1,127, which is a 22.5% raise from the 920 such filings, which occurred between January and March of 2008.

And, the numbers point out that those living in our state capitol in Austin are also trying to ease themselves of some of their overwhelming financial burdens. Bankruptcy filings of all types in the Austin area totaled just over 800 in the first quarter of 2009, which is up 25% from the same period last year. Despite data that shows more Texans are struggling to maintain their personal financial standing, our state is still faring better that most others in the country. Last year, Texas ranked forty-sixth in the nation in bankruptcies, even better than our 2007 ranking which placed us at number thirty-nine. Of course, this comparatively good news does nothing to lessen the pain of each person who is facing bankruptcy.
For those who are considering the option of declaring bankruptcy, you should be aware of the state and federal laws that affect such filings in Texas. There are two options available to individuals-Chapter 7 or Chapter 13 bankruptcy.

Chapter 7, the most common approach, is measured straightforward liquidation bankruptcy in which your non-exempt assets are handed over to a trustee allotted by the court and then converted into cash to pay your creditors. In reality, most people who file Ch. 7 have no non-exempt assets to sell and the Ch 7 bankruptcy filing essentially becomes a fresh start for their finances. The federal bankruptcy laws in Texas have deemed it so you can decide if you want to use the federal exemption statutes or the Texas statutes when cataloging the assets that creditors are not acceptable to touch.

With Texas having the most generous list in the country concerning what debtors may keep most bankruptcy filers choose to follow the Texas guidelines. You are eligible for Ch 7 bankruptcy if your income is below that of the median family income in Texas, as determined by U.S. Census Bureau statistics. If it is initially determined that your income is too high to qualify for Chapter 7 bankruptcy, the court can review your income from the past six months and your current expenses to form a decision based on your specific situation.
If the bankruptcy court determines that your financial standing makes you ineligible for a Ch 7 filing, then Ch 13 may be the most appropriate action for you. Under this system, known as debt reorganization bankruptcy, debtors develop a payment plan that will repay creditors over a period of three to five years. If you have some non-exempt assets that you wish to retain even after declaring bankruptcy, you may prefer to file as a Chapter 13 bankruptcy. This also holds true for people who have debts such as taxes or students loans that cannot be cleared through a Chapter 7 bankruptcy.

While a Chapter 13 filing may be seen as similar to working with a debt consolidation service, as both set up regular payments with the intention of bringing you current with your creditors, individuals looking for financial relief should know there are differences in the two options. With Chapter 13, you get the assurance of a court-appointed trustee (who may or may not be lawyers) who works with you to make sure those payments are appropriate and processed correctly. On the other hand, some private companies may be scams out to make a profit by charging exorbitant fees and they may not even result in the credit relief you desire. Such contracts should only be signed after completing extensive research on the company and reading the experiences that others have had.

Filing bankruptcy may seem like a wonderful solution to a financial crisis that has been draining you for years and this is true in many cases. However, you must remember that when you hire an attorney and declare bankruptcy you are affecting your assets, your credit score, and creating a record that is available to the public.

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