What is bankruptcy?
Bankruptcy is the process by which a person legally declares themselves unable to pay their creditors for their outstanding debts. In general, bankruptcy proceedings are governed by federal law, but there are some aspects of bankruptcy that are governed by state law.
These state laws can vary considerably from one another, so it is important that you speak with an experienced Texas bankruptcy attorney to be sure you understand Texas’s bankruptcy laws.
A person can go into bankruptcy in one of two ways. One way is for the debtor’s creditors to petition the court to have the debtor declared bankrupt. The more common way is for a person to voluntarily file for bankruptcy.
There are several types of bankruptcy, and which type you file for depends on many factors, including whether you are a business or an individual, the amount of debt you have, the amount of income you have and your personal financial goals.
For individuals, the two most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 “wipes the slate clean,” so to speak. Most, if not all, of your debts are discharged, and you get a chance to start fresh.
Chapter 13 is a debt repayment plan. You get to keep all of your property in exchange for committing to a plan whereby you repay some or all of your debt over the course of 3 to 5 years.