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There are many situations where a Chapter 13 Bankruptcy is preferable to a Chapter 7 Bankruptcy. A Chapter 13 bankruptcy is a preferred choice if a debtor is behind on the mortgage or business payments and they want to keep the property, either in Texas or another state.  A Chapter 13 bankruptcy allows a debtor to make up their overdue payments over time and to reinstate the original mortgage agreement. In general, if a valuable property is not covered by Texas bankruptcy exemptions that is to be kept, a Chapter 13 filing may be a better option. Also, people file Chapter 13 bankruptcy because they have too much income to file a Chapter 7 bankruptcy or have the kind of debt that is non-dischargeable in a Chapter 7 (ex. certain taxes).

However, for the vast majority of Texas residents who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.

Advantages to a Chapter 7 Bankruptcy filing:

  1. Receive a fresh start. After the Chapter 7 bankruptcy is discharged the only debts that are owed will be for secured assets on which  a “Reaffirmation Agreement” are signed. Secured debts include home and auto.
  2. Immediate protection against creditor’s collection efforts and wage garnishment on the date of filing.
  3. Wages earned and property acquired (except for inherited income) after the bankruptcy filing date are kept, not the creditors or bankruptcy court.
  4. There is no minimum amount of debt required.
  5. Bankruptcy cases are usually over and completely discharged in about 3-6 months.

Advantages to a Texas Chapter 13 Wage Earner plan:

  1. If the payment plan is affordable, debtors can keep all their property, exempt and non-exempt.
  2. While debts that are not cancelable in a Chapter 7 discharge they can be reduced under a Chapter 13 payment plan.
  3. Immediate protection against creditor’s collection efforts and wage garnishment.
  4. More debts are considered to be dischargeable (including debts incurred on the basis of fraud and credit card charges for luxury items immediately prior to filing).
  5. If the Chapter 13 plan provides for full payment, any co-signers are immune from the creditor’s efforts.
  6. Protection against foreclosure on a home by the lender as long as the terms of the plan are met.
  7. More time to pay debts that can’t be discharged by either chapter (like taxes or back child support).
  8. File a Chapter 13 at any time.
  9. File repeatedly.
  10. Separate your creditors by class where different classes of creditors receive different percentages of payment. This enables debtor’s to treat debts where there is a co-debtor involved on a different basis than debts incurred on their own.

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