For those facing financial struggles, bankruptcy may be a proverbial or literal life-saver. However, the process of filing bankruptcy can be confusing. Each type of bankruptcy serves a different purpose, and choosing the wrong type can cost you quite a lot in the long run.

If your business has been negatively impacted by the COVID-19 pandemic, help is just around the corner. Consider seeking protection through a bankruptcy filing with an experienced Brownsville bankruptcy lawyer.

The dedicated team of attorneys at the Law Offices of Phillippe and Associates would be proud to help you find your financial path forward. Read below to get an idea of what type of bankruptcy filing may suit your needs.

Chapter 7

Chapter 7 bankruptcy requires debtors to liquidate their nonexempt assets in order to pay off their debt. It doesn’t require a repayment plan and tends to be more affordable than Chapter 13. It is a filing that can greatly help small businesses and self-proprietors but isn’t the go-to option for bigger businesses and corporations.

Chapter 7 is also ideal for those who don’t own property, can pass a means test, and have primarily unsecured debt like credit cards, personal loans, and medical bills. It’s also the “fastest” form of bankruptcy filing since a reorganization plan isn’t required.

Under Chapter 7, a debtor files documentation of the entirety of their assets and debts. Then, a trustee determines a debtor’s nonexempt assets and then uses the value of those assets to pay off creditors.

In Texas, exempt items include a home and one vehicle per car-reliant individual in the home. In order to be eligible for Chapter 7 bankruptcy, a debtor must be an individual, partnership, corporation, or some other form of business. 

Chapter 11

Chapter 11 is an alternative to Chapter 7 which allows some debtors to remain in business while avoiding liquidation. This is a reorganization plan that is often used by big businesses to pay as many creditors as possible, but it can also be used by individuals. However, it’s worth noting that Chapter 11 is by far the most complex and usually the most expensive form of bankruptcy. 

During the Chapter 11 process, the court will assist a business in restructuring its debts so that it can stay open. Usually, the business will remain under the control of the debtor, also known as “debtor in possession”. However, a trustee may be appointed to run operations in the case of fraud, gross incompetence, or dishonesty.

Chapter 13

Chapter 13 requires a debt repayment plan and is used by individuals to pay back all or a portion of their debt over three to five years. Chapter 13 allows debtors to seek more manageable monthly payments, but they have to qualify first.

To qualify for Chapter 13, a person must have a steady income and can’t have debts exceeding a certain amount, which is $394,725 in unsecured debt and $1,184,200 in secured debt. Chapter 13 is similar to Chapter 11 in that both require filters to submit a reorganization plan. 

To file for Chapter 13, a debtor must submit a petition listing their assets, debts, living expenses, and tax information. Debtors are required to propose a repayment plan that will then be approved or denied by a bankruptcy judge or administrator. While Chapter 13 can’t be filed by certain businesses (e.g. partnerships, corporations, and LLCs), a sole-proprietor can file for it.

The Law Offices of Phillippe and Associates: Your Brownsville Bankruptcy Lawyers

The courts established bankruptcy filings to allow people struggling financially to find a way free of debts that are often the result of factors we can’t control in the first place.

Whether you’re a business trying to stay open, a steady earner struggling to make payments, or just a person looking for a way out from under a mountain of debt, there is a type of bankruptcy that can help.

If you’re struggling under a mountain of debt, the Law Offices of Phillippe and Associates can help. Contact us today to determine if filing for bankruptcy is right for you.



Filing for bankruptcy may seem frightening, but it may be just the thing you need for a fresh financial start. 

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