The Do’s and Don’ts of Chapter 13 Bankruptcy
November 1, 2010
When filing Chapter 7 bankruptcy, you are mainly discharging unsecured debts. If you want to keep your home and car, you want to pay on these secured debts. When filing Chapter 13 bankruptcy, you have much better protections for your property. By law, all collections against you have to stop for several months (called the automatic stay). Most all debts – other than monies owed such as child support, alimony, taxes, and luxury items recently bought – can be part of your Chapter 13 bankruptcy. But remember: you are paying some if not all your debts. Therefore, the first “do” is quite important.
Do List All Assets You Want to Keep
By law, you have to list all your assets and money in your Chapter 13 bankruptcy filing. This is where a lawyer can be crucial. But in Chapter 13 bankruptcy, the general rule is this: if you want to keep an asset, list it. If you want to keep your home, list it. If you want to keep your car, list it. If you have debts you want to start paying on, list them. In other words, list everything.
Don’t Do This Yourself
If you have some questions – and who doesn’t in their first bankruptcy? – the best answers come from an experienced Texas bankruptcy lawyer. You may read on the subject in books, articles, and blog posts like this one, but that does not equal the value of a lawyer. If mistakes are made, if you do something you should not, you stand to lose far more than the lawyer fee. Chapter 13 bankruptcy is a life changing process. You will be paying for 3-5 years. So when you do hire a lawyer, make sure he or she has experience.
Do File Before Foreclosure
The Texas homestead exemption allows you to protect your home from creditors, but if you fall behind in your mortgage, and wait to file Chapter 13, you may lose the home. If you file early enough, before foreclosure papers are filed, you can save your home. Therefore, get a good lawyer, start the process early, and protect your most valued asset.
Don’t Stop Car Payments
Chapter 13 bankruptcy discharges debts, but not in the same way as Chapter 7. You are paying on these debts. If you have a car, you may want to include it in the bankruptcy. But don’t stop making payments on your car; they can still repossess it in due time if you stop paying.
Do Change Your Habits
What got you into this financial problem? There is no need to dwell on mistakes – and sometimes you made no critical mistakes other than lacking medical coverage or being able to find a new job fast – but you should set some goals for how you will avoid a second bankruptcy. While you can file Chapter 13 bankruptcy more often than Chapter 7, filing multiple times can be difficult.
Don’t Give Up
If you hire a good lawyer, list everything in your filing, set some goals, and are completely honest, you stand to save a lot of time and money. You have to think positive. Think of how you’ll be able to save your home and car, to stop creditor harassment, to get a fresh start.