Even the federal government points out the advantages of Chapter 13 bankruptcy when compared to Chapter 7. While both have advantages and disadvantages, and though Chapter 7 is more common, there are some clear reasons for filing Chapter 13 in Texas. This guide explains them.
First, as noted on USCourts.gov, “chapter 13 offers individuals an opportunity to save their homes from foreclosure.” How? If you’re in danger of foreclosure, if you’re behind on payments, Chapter 13 can help. Say you have a Fort Worth home, you are behind on payments, but you have an income. In this situation, Chapter 13 bankruptcy can stop a foreclosure before it gets started. You can pay back missed payments, making them part of the plan. You can pay on your mortgage over the life of the repayment plan.
You still have to pay when you file Chapter 13. The problem with filing Chapter 7 in Texas is that you stand to lose the home unless you pay outside the bankruptcy. If you are incapable of making payments, you might as well discharge the debt with a Chapter 7 bankruptcy. If, on the other hand, you can pay on your mortgage – even if you are somewhat behind – the Chapter 13 option is much better.
Let’s go over another federal government bankruptcy tip: “Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan.” How does this help you? You can lower payment amounts by filing this way. The problem with Texas Chapter 7 is, even if you have a lot of unsecured debts like medical and credit card debt, if you make too much money you are ineligible. If you make more than the average income for Texas residents, based on if you are one person or a family of two or more, then you can’t file Chapter 7.
In this situation, you do have the option of filing under Chapter 13. It doesn’t matter how much you make, only that you don’t owe hundreds of thousands. You can even lower interest rates over the course of your repayment plan. If you owe a lot of credit card debt – monies owed you simply cannot afford with your mortgage – Chapter 13 may be better as you can get time to pay on the debts and keep your home from being taken.
It should be noted how foreclosure works in Texas. We are different. If you owe a hospital or credit card company $100,00, they cannot take your home. If you fall behind on your mortgage, technically the lender has the option of foreclosing on your home – if you stop making payments. So a lender can take your home, but a creditor cannot. This is the Texas Homestead exemption, a very unique and useful law which can protect your home.
With a Chapter 13 bankruptcy, you can protect your home by making payments over time and stopping a foreclosure before it begins. Both Chapter 7 and Chapter 13 bankruptcies are useful for certain problems. It’s good to study them, but your best resource on making a decision is a Texas bankruptcy attorney.