Chapter 13 Bankruptcy Attorney in Dallas, Texas

Even when facing overwhelming debt and falling behind in monthly payments, many people still shudder at the thought of filing for bankruptcy. Thoughts of “I’ll lose everything” and “I’ll forever be known as a failure” dart through their minds.

Bankruptcy, however, is a federal law designed to give people a fresh start in life. Seldom does someone lose everything since the code allows for exemptions, and Texas has some of the most generous exemptions in the nation.

On top of that, bankruptcy is a private process. Your friends and relatives need never find out, and your employer generally will never know either. Once you’ve discharged your debts through bankruptcy and you’re free to move on in life, the last feeling you’ll ever have is one of failure. More likely, it will be one of gratitude.

If debts are overwhelming you in or around Desoto, Texas, or through the Dallas and Fort Worth areas, contact the Hunt Law Firm. 

Attorney Gwendolyn E. Hunt is a debt relief and bankruptcy attorney who has been helping clients facing financial challenges for more than three decades. She’ll meet with you, review your finances with you, and steer a path to financial freedom for you under the bankruptcy code.

The Chapter 13 Bankruptcy Option

The bankruptcy code is divided into different sections called chapters. Chapter 13 of the code is for a form of bankruptcy that allows you to retain all your possessions while creating a repayment plan based on your disposable income after living expenses. It is thus often called “the wage earner’s plan.”

Individuals, families, and sole proprietors can use Chapter 13, but not businesses with more than one owner. To qualify for Chapter 13, you first must have a regular income, needless to say, and after that, you must have debts that fall under the ceiling of the law.

As of April 1, 2022, the debt ceiling is $465,725 for unsecured debts like credit cards, personal loans, and medical expenses, and $1,395,875 for secured obligations like homes and cars. The ceiling is adjusted for inflation every three years.

The Repayment Plan: How Chapter 13 Works

Remember, Chapter 13 is for people who have a regular income. That income is used to devise a three- to five-year repayment plan. This is done by factoring in all secured and student loan debt obligations, along with any alimony or child support payments. Once living expenses are computed, what is left over is your disposable income, which becomes the basis for your repayment plan.

Chapter 13 even allows that, should you be in arrears in your payments for your car or home, you can factor those past-due amounts into the repayment plan, but after that, you must continue to honor your normal monthly payment obligations.

Note that filing for bankruptcy leads to the court issuing what is called an automatic stay, which prevents creditors and bill collectors from ever contacting you again. It also puts a hold on repossession and foreclosure efforts, which gives you time to create your repayment plan to account for any secured debt arrearages.

Your repayment plan is subject to approval by your creditors, so it’s important to work out your Chapter 13 filing with a qualified bankruptcy attorney because there may need to be some give-and-take along the way to creating a workable and acceptable repayment plan.

Best Interest of Creditors Provision

As mentioned above briefly, Chapter 13 generally allows you to keep all your possessions, whereas, under a Chapter 7 liquidation filing, your nonexempt assets will be sold off to satisfy creditors.

In a Chapter 13 bankruptcy, the payments you make throughout your repayment plan must equal what the creditors in a Chapter 7 filing would obtain by seizing your nonexempt assets. This is known as the “best efforts” or “best interest of creditors” provision of Chapter 13.

Reaching the “best efforts” standard often dictates that the repayment period be stretched to five years. Trying to satisfy that standard in three years may simply require too large of a monthly payment.

Once your plan is approved – even before you will make your monthly payments to the bankruptcy trustee assigned to you, you won’t have to deal with your unsecured creditors on your own ever again once you attend the mandated meeting with creditors to review your proposed plan.

When you’ve fulfilled your repayment plan in three to five years, you will be discharged from all unsecured obligations and be debt-free except for secured loans that you are still paying off for your home or car, as well as your student loan obligations, alimony and child support.

Is Chapter 13 Right for You?

Chapter 13 does not put any of your possessions at risk so long as you continue to faithfully pay your monthly obligation to the trustee, but it also can put a crimp in your lifestyle for a major period of your life. If you’re used to dining out two or three times a week, that may be a sacrifice you have to make.

Another consideration is that you may have no choice but to use Chapter 13 if your household income is above the median in your state. Chapter 7 is only available for those whose incomes fall below the median. Chapter 13 is also not available for business owners unless they are sole proprietors whose debt is in their name.