Texas Bankruptcy Lawyer

This guest post is courtesy of Oak View Law Group:

No one initiates a business plan assuming it will fail in future and they will end up filing for business bankruptcy. People in Texas can opt for debt settlement Texas which is  a fruitful way to get rid of a surmounting debt for individual as well as for business. However, things change with the passage of time, and a time comes when exercising your bankruptcy options becomes the last resort for you or your business.

The formal bankruptcy resolutions are mainly based on federal law, but government can incorporate state-by-state variations as well. For example, the state of Texas abides by its bankruptcy laws very closely to the baseline federal statutes. Chapter 7, Chapter 13, and Chapter 11, are the ways used to resolve debt related issues in Texas. However these three legal categories to discharge debts are quite different from each other in execution and impact on the debtor. Weigh and consider the ramifications and bankruptcy consequences of different laws before you make the final decision of filing for bankruptcy in Texas.

Chapter 7 Bankruptcy

Chapter 7, bankruptcy is also known as “liquidation bankruptcy.” Here a trustee is hired to liquidate all nonexempt assets and disburse the proceeds to creditors in order to resolve all outstanding claims. As a result, the business gets rid of all financial obligations and is given a financial fresh start.  However it has certain pitfalls as well. The effect of Chapter 7 bankruptcies stays on the debtor’s credit report for at least 6 to 7 years and the debtor face significant challenges while attempting to secure new business capital or personal loans in the upcoming years.

Chapter 13 bankruptcy

A chapter 13 bankruptcy is referred to as “wage-earner plan,” and permits the debtors to methodically restructure the debtor’s business plan and catch up on bills. Here the debtor can keep the assets in dispute and execute a court-controlled payment plan. This is quite helpful for mid-level debtors who have cumulative debts of less than $100,000 in unsecured debt, and more than $350,000 in secured debt, but corporations and partnerships can not be benefited much by this plan as they are not allowed to participate. This plan can help the debtor complete and close out any payment plan comparatively earlier, minimize the damage to the debtor’s credit rating to some extent, and above all increase the future value of their business.

Chapter 11 Bankruptcy

When a troubled business decides that it is unable to service its debt or pay its creditors, the most obvious bankruptcy option it looks for is Chapter 11 bankruptcy. In Chapter 11, the Bankruptcy Code governs the process of reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is a financial reorganization procedure mostly used by corporations and partnerships. Because the Chapter 11 cases can drag on for years, a creditor is given the right to file its own plan for the reorganization of his or her company. This plan is an attempt to stay in business while a bankruptcy court supervises the outstanding claims and details how each of these claims will be treated. The claim must also project how the company would be benefited if it were allowed to keep its assets from being liquidated. Chapter 11 is planned to preserve a viable business that otherwise would be lost in a liquidation. The plan materializes only when the creditors approve the plan with majority vote.

In addition to these bankruptcy laws, there is one more bankruptcy process in Texas, known as involuntary bankruptcy. Here the creditors get the right to compel the debtor to enter into bankruptcy by filing a formal petition with the court. Once your business goes through the trials and tribulations of a bankruptcy, make sure you do not repeat the same financial blunders again, and lead a secure financial life in the future.