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The Short-Term and Long-Term Benefits of BankruptcyBankruptcy may have a negative stigma for people who do not understand what the process means. Bankruptcy is a solution to your debt problems, not a symptom of them. You file for bankruptcy to stave off creditors and ultimately clear yourself of eligible debts that are causing you stress and threatening your financial security. When filing for bankruptcy, you should understand that there are immediate and long-term benefits.

Immediate Benefits

You will immediately notice the effect of filing for bankruptcy because it will enforce an automatic stay on your creditors. This means an immediate stop to:

  • Persistent phone calls and letters about repayment;
  • Looming litigation by your creditors;
  • Garnishment of your wages by the IRS and student loan lenders; and
  • Imminent foreclosure or repossession of your properties.

The automatic stay gives you time to assess your financial situation and how you wish to proceed with the bankruptcy process. It is difficult to concentrate on making those decisions if you are worried that the bank is about to foreclose on your home.

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Making Sure to Include All Creditors in a Bankruptcy FilingFailing to list all of your creditors during your bankruptcy case might mean that you cannot discharge the debt, especially if you intentionally omit a creditor. If the case is ongoing, you can amend your bankruptcy Schedules to include an additional creditor. However, fixing your mistake is trickier if you have already completed your bankruptcy and your debts have been discharged. You may be responsible for the debt to your missing creditor.

Chapter 7 and No-Asset Cases

If you discover a missing creditor after a Chapter 7 bankruptcy case, your liability may depend on whether you had a no-asset case. In a no-asset bankruptcy, the trustee does not liquidate any assets because they are all exempt, and your debts are still discharged. So, a bankruptcy court may rule that the debt from an omitted creditor in a no-asset case is already discharged because the creditor would not have received money from the bankruptcy. Most Chapter 7 cases in Texas are no-asset cases. However, this ruling does not apply if the creditor has a debt that is considered non-dischargeable, such as child support, alimony or certain taxes. 

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Roadblocks to Discharging Debt After BankruptcyOne of the most powerful tools in filing for Chapter 7 or Chapter 13 bankruptcy is the ability to discharge your debt. After you have completed the conditions of your bankruptcy, the court may clear you of your remaining debt obligations and prohibit your creditors from continuing collection efforts. Because this represents a loss to them, your creditors may search for reasons why you should still be liable for the remainder of your debt. Discharge is not guaranteed as part of bankruptcy. You must follow the correct procedures and make a good-faith effort to repay your debt.

Requirements

There are several steps needed to qualify for debt discharge, and missing any one of them may cause a court to deny your request. The requirements include:

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Why You Should Talk to a Bankruptcy Lawyer

Collin County bankruptcy attorneyI recently read an article on forbes.com about bankruptcy, and it has been niggling in the back of my mind ever since. The author is not a bankruptcy lawyer, but there he is on the Internet pontificating about the three most important things you need to know about filing for bankruptcy.

He noted that bankruptcy isn’t free, saying that this is a “surprise” to many people. I’m not sure why anyone would have an expectation that filing for bankruptcy would be free. People don’t go to the store and expect to get their groceries for the week for free. They don’t go to the hospital for surgery and expect the surgeon and the hospital to thank them for coming in and provide services for free.

The article goes on to say that most lawyers charge by the hour. While this is true for many lawyers, it is not necessarily the case for consumer bankruptcy lawyers. Most charge a flat fee, which is typically a small percentage of the debts that are discharged and the assets that are protected. Furthermore, unlike other areas of the law, there is oversight of the fees that bankruptcy lawyers charge, because those fees are disclosed as part of the bankruptcy filing (in two different places) and must comply with the local rules of the bankruptcy court.

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National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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