In Mckinney, Texas, bankruptcy is a judicial process in which the debts of a person or business can be eliminated or restructured. This allows the debtor to climb out of a financial hole, and move on with a clean slate, which is sometimes more economically efficient than requiring the debtor to pay off everything they owe. Bankruptcy should be treated as an option of last resort, and should not be viewed as a proper way to get out of debt that you just don't feel like paying. Bankruptcy can have severe consequences, including but not limited to damage to your credit rating. A bad credit score can impact your ability to obtain loans in the future, to rent an apartment, and possibly even your ability to get hired at some jobs (as some employers now run credit checks on prospective employees).
Therefore, it is prudent to consult with an experienced Mckinney, Texas bankruptcy attorney, who can advise you of the costs and benefits of bankruptcy. Because the decision to file for bankruptcy depends very heavily on the facts of each individual case, the advice of a Mckinney bankruptcy attorney cannot be substituted.
Types of Bankruptcy in Mckinney, Texas
In Mckinney, Texas, there are 3 types of bankruptcy in common use: Chapter 7, Chapter 13, and Chapter 11. Because bankruptcy is a creation of federal law, the procedures governing bankruptcy in Mckinney, Texas will be similar anywhere else in the U.S. Chapter 7 bankruptcy requires the debtor to liquidate some of his or her property, and use the proceeds to pay creditors. While this doesn't sound like much of a relief at first glance, the upshot is that once the qualifying property is sold, and the proceeds given to the creditors, all of the debtor's eligible debts are deemed paid in full, regardless of how much the creditors actually ended up getting. Not all of the debtor's property has to be sold off - the debtor will normally be allowed to keep things like a house, at least one car, some types of personal property, retirement accounts, and insurance policies. It should be noted that some debts are not dischargeable, and will have to be paid in full even if the debtor files for bankruptcy. This includes student loans, taxes, and criminal fines.
The other common bankruptcy scheme used by consumers in Mckinney is Chapter 13 bankruptcy. In this system, debt is not discharged. Instead, it is restructured. This allows the debtor to have the terms of the contracts that gave rise to their debts in the first place thrown out, and replaced with new terms that call for a structured repayment plan, designed to allow the debtor to survive on whatever income they have, and allowing the creditors to get paid back eventually. Once a payment plan is approved, creditors are not allowed to attempt to collect payment under the original agreements. Though Chapter 11 bankruptcy can be used by individuals, it is almost exclusively used by businesses. Similar to Chapter 13, Chapter 11 involves restructuring of debts, rather than complete discharge. The debtor is required to come up with a restructuring plan that lays out how it plans to cut costs, streamline operations, and pay its debts. The plan must then be approved by a vote of participating creditors.
While going through Chapter 11 bankruptcy, a business can continue operations, and its stock can continue to be traded.
How Can a Mckinney Bankruptcy Lawyer Help?
The need to consider all the options and consider the costs and benefits of filing for bankruptcy in Mckinney cannot be overstated. If you are considering filing for bankruptcy, it would be a good idea to speak with a Mckinney bankruptcy attorney beforehand.