Dealing With Your Car
How to deal with your car or truck when filing Chapter 7 bankruptcy in Texas is one of the most important questions folks usually have. After all, you need your car to get around, go to work, pick up kids from school and do all those things that make the Lone Star State great.
If your vehicle is paid for, itâs yours to keep as long as you are able to claim an exemption for its full value. If you still owe on a car loan, which is considered a secured debt, a Chapter 7 bankruptcy allows you to keep the car by entering into a reaffirmation agreement. Of course, if the car loan balance is much higher than the value of the vehicle, you can surrender the car. Unlike a repossession outside of bankruptcy, youâll not have to pay the unsecured portion of the loan – thatâs discharged. Finally, if youâre able to raise some funds to buy your vehicle for its current value, you can do that as well.
Disadvantages To A Chapter 13 Bankruptcy Payment Plan
What Are The Other Types Of Bankruptcy In Texas
Besides filing for a Chapter 7, 11, or 13 bankruptcy in Texas, persons or entities can also file for a Chapter 12 bankruptcy. First used in 1980 to reorganize farmers debts, the Chapter 12 bankruptcy petition specifically caters to farmers and fishermen. Eligible persons may file for Chapter 12 bankruptcy to prevent loss of properties and assets.
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Benefits Of Chapter 12 For Family Farmers And Fishermen
Bankruptcy laws provide debt relief options for a variety of situations. Chapter 7 helps people or businesses seeking a fresh start. Businesses that need to reorganize their debts while continuing to operate can do so under Chapter 11. Chapter 13 offers individuals the chance to create a repayment plan to get out of debt. And Chapter 12 was created to extend the benefits of Chapters 11 and 13 to family farmers and family fishermen.
Like a Chapter 13 bankruptcy, a debtor in a Chapter 12 case proposes a reorganization plan to catch up on delinquent debts and repay over 3-5 years. This plan must meet the Chapter 12 requirements. Like a Chapter 13 plan, creditors donât have to approve the plan. But Chapter 12 offers benefits to family farmers and fishermen that go beyond the benefits available in a Chapter 13 case.
Disadvantages To A Chapter 7 Bankruptcy
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The Texas Homestead Exemption
Texas is one of a small handful of states which provide an unlimited homestead exemption for your home, meaning that it does not matter how much it is worth or how much equity you have in it. Most states have a maximum amount you can protect, and after that it could be sold to pay your creditors. Not in Texas. Theres no limit.
With Texas homestead exemptions, there are some acreage maximums10 acres in a city, town or village, 100 acres in the country . And federal bankruptcy law applies a maximum to amount of equity you can protect if you bought your Texas home less than 1215 days before filing the bankruptcy case.
Bankruptcy Requirements In Texas
Filing for bankruptcy falls under federal laws, but for the state of Texas there are additional requirements that you may need to meet, as well as exemptions that apply strictly to residents of the state. Below are listed some of the unique requirements for filing for Chapter 7 bankruptcy in the state of Texas.
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How Will Bankruptcy Affect My Credit
Many clients actually report that their credit scores increase after they receive their bankruptcy discharge. This is because Erin makes sure that all derogatory entries on your credit report are included in your bankruptcy paperwork and that your credit reports are changed after your discharge to reflect that all of your debt has been discharged. I also have a strong relationship with a large local car dealership that offers post-discharge credit for car loans as soon as you receive your Chapter 7 bankruptcy discharge. This post-discharge credit helps restore your credit score quickly and efficiently.
Can I Keep My Property After Filing For Bankruptcy
Texas and Federal exemption laws allow virtually all debtor to retain all their assets. Although exemption law is complicated and varies from state to state, a brief summary of Texas and Federal exemption law is as follows:
- Automobiles and other motor vehicles You can retain your vehicle as long as you continue to make the payments on that vehicle. However, many of our clients opt to purchase a replacement vehicle after their bankruptcy discharge thereby obtaining more reliable transportation and helping improve their credit.
- Homestead Texas has one of the most generous homestead laws of all fifty states. You can retain your home in the city, no matter how much it is worth if it is on ten acres or less. You can retain your home in the country if it is on less than 100 acres if you are a single person and 200 acres or less if you are a member of a family.
- Retirement accounts Retirement accounts, such as IRAs and 401s, are exempt as long as they are valued at $1 million or less. Obviously, this large limit allows virtually all Texans to retain all their retirement when they file a bankruptcy case.
- Personal property In Texas, you can keep all of the contents of your home as long as they are worth less than $50,000.00 if you are single and $100,000 if you are a member of a family. You are required to list all the assets that you own, under penalty of perjury, but these large limits allow virtually all honest debtors to retain all their assets as exempt.
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S To Take When Filing For Bankruptcy
Even if you believe filing for bankruptcy is the right choice, how do you know which one to file? There are several bankruptcy options, including Chapter 13, Chapter 7 and Chapter 11, or business bankruptcy. Following these steps can help you understand how to file for bankruptcy and the benefits and drawbacks of each type.
How Much Does Chapter 13 Bankruptcy Cost In Texas
How much does it cost to file Chapter 13 bankruptcy? If you qualify to file Chapter 13 Bankruptcy, the Texas Bankruptcy Courts filing fee for a Chapter 13 Bankruptcy is a fixed rate of $310.00. The Bankruptcy trustee may charge an additional $15 to $20 or may waive this fee.
Mandatory credit counseling fees will range between $20 and $100. Attorneys fees will range between $975 and $2,000 on average. All in, the total cost of your Chapter 13 Bankruptcy will likely be from $1,320 on the low side to $2,430 on the high side. If you cannot pay the filing fee at once due to your financial circumstances, most courts will allow you to explain the circumstances and request to break the payments up over time.
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How To File A Chapter 13 Bankruptcy In Texas
Individual debtors can file for chapter 13 bankruptcy in Texas with or without the aid of an attorney. Chapter 13 bankruptcies filed without the aid of an attorney have a low success rate. With the aid of an attorney, debtors can collate the necessary documents for filing Chapter 13 bankruptcy in Texas. In addition to this, debtors must provide the following information:
- Documents detailing the debtors source of income
- List of all creditors and debt owed
- A detailed list of the debtors monthly expenses and liabilities
- The debtors tax information.
In addition to this, debtors must attend a verified credit counseling course at an approved agency. Debtors can find the nearest credit counseling agency in Texas on this online list. After filing a Chapter 13 bankruptcy, debtors will propose a debt repayment plan. Furthermore, the bankruptcy judge will vet and approve the debtors repayment plan in line with the Bankruptcy Codes guidelines.
Choose The Right Type Of Bankruptcy
Bankruptcy laws are complex. There are many issues to consider, and its important that you fully understand the benefits and limitations of the different types of bankruptcies. For example, if you want to file for bankruptcy to stop home foreclosure and get current with your mortgage payments, filing for Chapter 13 bankruptcy may be appropriate. If you dont own your home but need to get rid of overwhelming credit card or medical debt, filing for Chapter 7 bankruptcy can help wipe out your debt and give you a clean financial slate.
Chapter 13 Bankruptcy
Also called a wage earners plan, Chapter 13 bankruptcy allows consumers and some businesses to develop a payment plan to catch up on secured debts over a period of three to five years and to eliminate or greatly reduce unsecured debt . It can also lower your interest rate on certain secured debts and even allow you to pay the current value of your car if you are upside down.
Chapter 7 Bankruptcy
Unlike its counterparts, Chapter 7 bankruptcy does not entail the filing of a payment plan. Many people are leery of Chapter 7 bankruptcy because they think the trustee will sell all of their property. In most cases, no property has to be given up or sold. To qualify for Chapter 7, you may be subject to a means test to determine whether you have the income or resources to repay some or all of your debt.
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What Are Texas Bankruptcy Exemptions
In Texas, bankruptcy exemptions protect the debtors properties and assets during bankruptcy. Texas residents may opt to choose federal bankruptcy exemptions or state bankruptcy exemptions. However, debtors are not allowed to use both federal or state bankruptcy exemptions. Most debtors prefer to use Texas bankruptcy exemption laws due to benefits, such as the homestead exemption. Under the state exemption law, debtors can retain their homes based on the property size and location.
The state bankruptcy exemption law, for example, does not exempt properties situated on more than ten acres in the city. In addition, debtors can retain the proceeds from a sold property for at least six months after the sale. Note that Texas bankruptcy exemption laws cover properties that serve as the debtors primary residence. Thus, rental properties are not protected under Texas bankruptcy exemption laws.
Furthermore, personal properties, such as jewelry, clothes, motor vehicles, and furniture, are also exempt from bankruptcy. For a single debtor, the total value of exempted properties must not exceed $50,000. On the other hand, a joint filing for bankruptcy in Texas may double the total value of exempted properties to $100,00
In contrast, debtors may file for bankruptcy using federal bankruptcy exemption laws to take advantage of the wild card exemption rule. The wild card exemption rule enables debtors to exempt any preferred property.
So What Really Constitutes Undue Hardship
Those cases where borrowers have succeeded in having their student loans discharged are insightful. Specifically, a court might agree that repaying your loans would be an undue hardship if you cant maintain a minimal standard of living for yourself and any dependents, if the hardship will continue throughout the loans repayment period, and if youve sincerely tried to repay your loans before filing bankruptcy.
What does a court consider a minimal standard of living? Again, case law and some common sense can be a guide. It might mean:
- Your income has been below the federal poverty level for several years and doesnt show signs of improving.
- Youre on public assistance or dependent on a family member.
- You have a debilitating mental or physical illness or permanent injury.
- You have a child with a serious illness who requires round-the-clock care.
- Divorce reduced your family income with no hope of it returning to its previous level.
- Disability checks are your only source of income.
- You depend on public assistance to support your children.
- You support a spouse who was seriously and permanently injured in a car accident or who has developed a total disability.
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What Are The Downsides Of Filing For Bankruptcy In Texas
Parties who file for bankruptcy in Texas may experience downsides, such as a lower credit score due to the bankruptcy petition. For instance, persons who file a Chapter 7 bankruptcy may see a negative mark on their credit score for ten years from the filing date. In comparison, a Chapter 13 bankruptcy case will incur a negative mark on a credit score for seven years from the filing date.
In addition, debtors may experience the following downsides of filing for bankruptcy
- In terms of a Chapter 7 bankruptcy, debtors may lose non-exempt properties which a bankruptcy trustee sells. In addition to this, debtors may lose secured properties and assets not completely covered by Texas bankruptcy exemptions
- Co-signers to a loan are also liable to repay the debtors personal debt unless they file for bankruptcy protection
- Persons under a Chapter 13 bankruptcy may deal with debt repayment plans that last up to five years
- Debtors are not eligible for a mortgage or car loans
In contrast, filing for bankruptcy provides debtors with the following benefits:
- A Chapter 7 bankruptcy provides debtors with a complete relief from all debts owed
- Properties and assets are protected and exempt from collection by creditors
- Bankruptcy cases under Chapter 7 have a short timeframe within three to six months
- Chapter 13 bankruptcy plan enables debtors to repay debts over a long time.
What Are The Steps To Filing A Chapter 13 Bankruptcy
Generally speaking, the initial process of filing a Chapter 13 bankruptcy is, more or less, similar to filing a Chapter 7 bankruptcy. It doesnât get much more complicated until you reach the point at which you have to properly calculate what your monthly Chapter 13 payments will be based on a number of different factors.
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What Does The Simplest Chapter 7 Bankruptcy Case Look Like
A very straightforward Chapter 7 case:
- Protects you and your possessions and property right away from all of your creditors
- Enables you to hold onto everything you own
- Lets you keep or surrender any collateral based on your choice and
- Discharges all your unsecured debts such as credit card debt.
Its worth noting that if your income is below the state of Texas median income for households of a similar size, you are eligible to file for Chapter 7 bankruptcy. If your income exceeds the median income level, you must pass a means test to file under the terms of Chapter 7 which takes into account your income and expenses.
Now, lets take a closer look at the process.
Texas Bankruptcy Exemption Timing Rules
It’s tempting to move to a state with significantly more generous bankruptcy exemptions when filing for bankruptcy. But it likely won’t do much good. To prevent people from abusing the system, filers must live in the state for at least two yearsotherwise, they must use the previous state’s exemptions. Here’s how it works.
- If you’ve made your permanent home in your current state for at least two years, you can use the state’s exemptions .
- If your domicile hasn’t been in the same state for two years, the rules get more complicated, so prepare yourself. In fact, it sounds so strange we’ll explain it in three different ways, so you know you didn’t read it wrong. Here goes: You’ll choose the state that you lived in the longest during the 180 days immediately before the two years before filing.
Did you get that? If not, here’s a way to figure it out. Count back two-and-a-half years. Then ask yourself where you lived the longest during the first six months of that two-and-a-half-year period.
Still confused?Let’s try an example. Suppose you planned to file on January 1, 2022. Your two-and-a-half-year period would start July 1, 2019, and you’d qualify to use the exemptions of whichever state you resided in the most during the July 1, 2019, through December 31, 2019 period. You wouldn’t have to file your case there, but you’d use that state’s exemptions. Hopefully, that helps!
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What Is Chapter 7 Bankruptcy In Texas
In Texas, Chapter 7 bankruptcy is a series of legal steps in which the court liquidates a debtors assets to settle debts owed to creditors. Bankruptcy courts in Texas appoint a bankruptcy trustee responsible for selling the debtors assets and distributing the proceeds of the liquidation to creditors. Chapter 7 bankruptcy is one of the most common types of bankruptcy since it enables debtors to discharge unsecured debts, such as medical bills, income tax debts, and personal loans. More so, individual debtors can also discharge student loan debts if the court finds sufficient evidence of undue hardship. However, filing a chapter 7 bankruptcy in Texas does not exempt debtors from the following debts:
- Spousal support
- Personal debts incurred from accidents caused by intoxication
- Court fees and penalties.
Under Chapter 7 Bankruptcy rules, not all properties or assets are liquidated to pay creditors. For instance, Texas bankruptcy exemptions allow debtors to keep the following assets and properties:
- Homesteads less than one acre in any location. Also, the sales proceeds from the landed property are exempt from liquidation Property 41.001, 41.002
- Personal properties, such as sports and athletic equipment, burial plots, and church benefits
- Insurance-related benefits include Texas employee uniform group insurance and life insurance of which the debtor is a beneficiary. Insurance 3.50-4