Chapter 7 in Plain Language
What can bankruptcy do for plain people (not businessmen or corporations)?
Answer: A lot.
What happens if I file a bankruptcy against credit cards, medical debt and other normal debts?
Answer: The debt disappears.
What do I lose?
Answer: If you file in Texas, probably nothing.
What about my credit? Do I lose my credit rating?
Answer: Of course. But getting rid of debt is the first step to rebuilding excellent credit. If you are contemplating a bankruptcy your credit is probably pretty low or getting there anyway.
What about my house? Can I lose my house in a bankruptcy?
Answer: No, if your house is financed with "plain vanilla" financing with no history of fancy deals or large payments against the mortgage. We look carefully at each homestead to be sure that it is safe.
What if I have a lot of equity in my house?
Answer: It's ok. There is no cap on a Texas homestead.
What about my taxes - can I bankrupt my taxes?
Answer: Yes, but it depends on how old they are.
Do I have to pay taxes on the debt that I got rid of in a bankruptcy?
Answer: No, unless you have investment property or fall into certain other categories.
How much does it cost?
Answer: $2000 for a plain vanilla bankruptcy, and that includes the filing fee of $300.
So, how much debt does that $2000 take care of?
Answer: All of it, no matter how much it is. However it will not get rid of student loans, some taxes and certain other debts.
OK, so is there any bad part of bankruptcy?
Answer: Not a lot, assuming you're honest and you prepare your case properly.
But I've heard of people who say it's awful.
Answer: It can get really awful if your bankruptcy is not prepared properly.
Any special advice?
Answer: Do it right the first time.
Charles Chesnutt, Sr.
Board Certified in Consumer Bankruptcy Law by the Texas Board of Legal Specialization
(In plain language, Charles is an experienced bankruptcy lawyer for the rest of us)