If you’re struggling with more debt than you can reasonably hope to repay, Chapter 7 bankruptcy can help you overcome it and find your way to financial freedom. Before you file though, it’s important to be aware of what this particular bankruptcy chapter can and cannot do for you in terms of debt relief.
Chapter 7: The Facts
According to the American Bankruptcy Institute, 475,332 people filed for Chapter 7 bankruptcy in the U.S. in 2016. This number accounted for 61.66% of all bankruptcy filings, indicating that Chapter 7 is the relief avenue of choice for most Americans overwhelmed by debt.
It’s easy to see why. Unlike Chapter 13, which lasts three to five years and requires you to repay a portion of your debts, it is over relatively quickly and eliminates most unsecured debt. We say ‘most’ because not every financial obligation can be discharged in a Chapter 7 filing. It’s a fact that comes as a surprise for some filers.
Debts That Survive Chapter 7
In Texas, unless you can demonstrate extraordinary circumstances, the debts listed below are deemed automatically nondischargeable:
- Income tax debts going back three years, as well as other types of tax debt
- Financial obligations related to supporting your family, such as child support and spousal support arrears
- Student loans, unless you are able to successfully prove that repaying them would create undue hardship for you
- Fines and penalties that resulted from violations of the law, such as speeding tickets and criminal restitution
- A debt imposed on you by the courts for personal injury or death caused by driving while intoxicated
- Debts that you forgot to include in your bankruptcy filing
Debts That May Survive Chapter 7
Certain types of debt may be declared nondischargeable by a bankruptcy court judge if the creditors in question challenge your attempt to obtain a discharge. The court will typically require them to file a motion before scheduling a hearing on the matter. In Texas, such debts include:
- Debts that were incurred via fraud, larceny, embezzlement, or similar breach of trust
- Luxury goods or services valued at $1,150 or more acquired via credit within 60 days of filing for bankruptcy
- Cash advances or loans of $1,150 or more taken out within 60 days of filing
- Debts you incurred due to intentional or malicious injury to another person or their property
If the court does not agree with the creditor’s objection, your discharge can still be allowed. These debts may also be discharged if the creditor does not object in the first place.
With so many variables involved, anyone who is thinking about filing for Chapter 7 in Texas should consult an experienced bankruptcy attorney first. At Fraser, Wilson & Bryan, we take pride in helping consumers get the financial fresh start they need. To schedule a consultation, please call (254) 965-7270 today.
