S In A Texas Bankruptcy
We all know that seeing the forest helps us recognize the trees, so it’s probably a good time to consider the significant steps you’ll take during your bankruptcy journey. Think of this checklist as a roadmap of sorts, but you can also use it to track your progress. The good news? You’ve already made headway on the first two items!
Choosing The Right Bankruptcy Chapter For You In Texas
Most people file either Chapter 7 or Chapter 13. If you don’t know the differences between the two, you’re not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clear things up.
Chapter 7 bankruptcy.Chapter 7 is often a bankruptcy filer’s first choice for several reasons. It’s quickit only takes a few months to complete. And it’s cheapyou don’t pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.
People with more assets could lose them, however, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamaseven your house or vehicle if you have too much equity in it or you’re behind on the payments. Unlike Chapter 13, Chapter 7 doesn’t have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you’re behind when you file.
Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.
Status Of Certain Defined Benefit Pension Plan Liabilities In Bankruptcy
The Pension Benefit Guaranty Corporation , a U.S. government corporation that insures certain defined benefit pension plan obligations, may assert liens in bankruptcy under either of two separate statutory provisions. The first is found in the Internal Revenue Code, at 26 U.S.C. Â§ 412, which provides that liens held by the PBGC have the status of a tax lien. Under this provision, the unpaid mandatory pension contributions must exceed one million dollars for the lien to arise.
The second statute is 29 U.S.C. Â§ 1368, under which a PBGC lien has the status of a tax lien in bankruptcy. Under this provision, the lien may not exceed 30% of the net worth of all persons liable under a separate provision, 29 U.S.C. Â§ 1362.
In bankruptcy, PBGC liens generally are not valid against certain competing liens that were perfected before a notice of the PBGC lien was filed.
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Federal Bankruptcy Jurisdiction And Procedure
Regardless of the type of bankruptcy and the parties involved, basic key jurisdictional and procedural issues affect every bankruptcy case. Procedural uniformity makes bankruptcies more consistent, predictable, efficient, and fair.
Judges and Trustees Pursuant to federal statute, appoint bankruptcy judges to preside over bankruptcy cases . Bankruptcy judges make up a unit of the federal district courts called bankruptcy court. Actual jurisdiction over bankruptcy matters lies with the district court judges, who then refer the matters to the bankruptcy court unit and to the bankruptcy judges.
A trustee is appointed to conduct an impartial administration of the bankrupt’s nonexempt assets, known as the bankruptcy estate. The trustee represents the bankruptcy estate, which upon the filing of bankruptcy becomes a legal entity separate from the debtor. The trustee may sue or be sued on behalf of the estate. Other trustee powers vary depending on the type of bankruptcy, and can include challenging transfers of estate assets, selling or liquidating assets, objecting to the claims of creditors, and objecting to the discharge of debts. All bankruptcy cases except chapter 11 cases require trustees, who are most commonly private citizens elected by creditors or appointed by the U.S. trustee.
Issues Under The Jurisdiction Of Federal And State Laws
Following are some of the issues that come under the federal law:
- Federal criminal laws
The following issues are determined and legalized by the state:
- Criminal matters
- Welfare, public assistance or Medicaid matters
- Wills, inheritances and estates
- Personal injuries such as from a car accident or medical malpractice
- Workers compensation for injuries at work
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What Are The Texas Bankruptcy Exemptions And Why Are They Important In A Chapter 7 Bankruptcy
If you have been struggling with mounting debt, such as credit card debt, you might be interested to know what relief bankruptcy offers. However, you may hesitate to seek help as you may have heard or read that you would need to sell your property, such as your motor vehicle, during the process. Although some filers might have to surrender an expensive asset, a majority of people donât lose any property when filing a Chapter 7 bankruptcy in Texas. This is contrary to some commonly held myths about bankruptcy. Bankruptcy exemptions in Texas, like other states, protect your most treasured assets, such as furniture, clothing, and interest in a home, from the reach of your creditors.
An exemption is a law that protects certain property from the claims of your creditors. A bankruptcy trustee cannot seize exempt property in a liquidation .
In fact, Texas bankruptcy exemptions are designed to allow filers to keep certain property, like equity in their home, their automobile, household furniture, clothing, firearms, and even the family bible.
Many people in Texas think that filing for bankruptcy will cost them everything they own. This is not true. There are several protections or exemptions available to help you keep more of your property or pay less to your unsecured creditors. These bankruptcy protections are mentioned in Texas exemption laws.
Entities That Cannot Be Debtors
The section of the Bankruptcy code that governs which entities are permitted to file a bankruptcy petition is 11 U.S.C. Â§ 109. Banks and other deposit institutions, insurance companies, railroads, and certain other financial institutions and entities regulated by the federal and state governments, and Private and Personal Trusts, except Statutory Business Trusts, as permitted by some States, cannot be a debtor under the Bankruptcy Code. Instead, special state and federal laws govern the liquidation or reorganization of these companies. In the U.S. context at least, it is incorrect to refer to a bank or insurer as being “bankrupt”. The terms “insolvent”, “in liquidation”, or “in receivership” would be appropriate under some circumstances.
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How Much Does Bankruptcy Cost In Oregon
The bankruptcy filing fee, which varies slightly in different jurisdictions and in different types of bankruptcy, is usually about $350. If you have a financial need, an installment plan or even a fee waiver might be available.
A bankruptcy lawyer’s professional fee also varies, usually depending on the location and type of bankruptcy. Sliding scales and installment plans are usually available, regardless of financial need. Additionally, Chapter 13 bankruptcy debtors can include most or all of the professional fees in their monthly debt consolidation payments.
Depression Era Bankruptcy Reforms
Table 4. Bankruptcy Petitions Filed, 1899-1997
Sources: 1899-1938 Annual Report of the Attorney General of the United States 1939-1997 and Statistical Abstract of the United States. Various years. The Report of the Attorney General did not provide the numbers voluntary and involuntary from 1934-36.
In 1933, Congress enacted amendments that allowed farmers and wage earners to seek arrangements. Arrangements offered more flexibility than compositions. Debtors could offer to pay all or part of their debts over a longer period of time. Congress also added section 77, which provided for railroad reorganization. Section 77 solved two of the problems that had plagued corporate reorganization. Bankruptcy courts had jurisdiction of the assets throughout the country so that ancillary receiverships were not needed. The amendment also alleviated the holdout problem by making 2/3 votes of a class of creditors binding on all the members of the class. In 1934, Congress extended reorganization to non-railroad corporations as well. The Thacher Reports recommendations for a bankruptcy administrator were not enacted, largely because of opposition from bankruptcy lawyers. The 1898 Bankruptcy Act had created a well-organized group with a vested interest in the evolution of the lawbankruptcy lawyers.
Table 6. Business Failures, 1870-1997
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Should You Hire A Bankruptcy Attorney
Handling debt and bankruptcy can be confusing and often overwhelming. Doing your research is essential, but sometimes it’s in your best interests to consult with an attorney.
An experienced bankruptcy and debt attorney will evaluate your case and explain all your legal options. This should cover everything from the bankruptcy process to more informal debt relief actions .
For Chapter 7 filings, the average debtor can have their debts discharged within six months. For Chapter 13 filings, the process can take from three to five years. In either case, having an attorney can help you navigate these proceedings.
If you’re planning to contact an attorney, use a checklist to gather the documents that the attorney will need to see. This includes financial records, legal records, a combination of assets you own, and your income verification.
Bankruptcy Information By State
Bankruptcy is primarily governed by federal law. However, each state is given the opportunity to make bankruptcy rules for its citizens. State laws amplify the federal law in areas where federal law is silent or expressly defers to state law. The specific rules that the state formulate typically come in the form of state statutes and judicial precedents. Exemption is the most important type of state bankruptcy rule. Exemptions are rules that help debtors in determining what property they get to keep, in case they are filing a Chapter 7 bankruptcy, and how much they have to repay their creditors in case they go for a Chapter 13 bankruptcy.
Depending upon the state in which you file for bankruptcy, property exemptions may be governed by state or federal law. Some states mandate using state law for property exemptions. Whereas, others give the debtor an option to choose between federal and state law. For example, federal bankruptcy exemption is not available in Alabama. But in Alaska, a debtor may choose between federal or state bankruptcy exemptions.
State law also play an important role while making decisions about whether or not to file for bankruptcy and the type of bankruptcy best suited for the debtor. Therefore, state law plays an important role in many bankruptcy cases and the debtor should be aware of the state bankruptcy laws before filing for bankruptcy. We cannot generalize bankruptcy law across state lines.
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Federal Vs State Bankruptcy Law
Financial obligations comprising debts formed by contracts, such as telephone service, rental leases, and medical expenses, are often governed by state laws. However, once a creditor or debtor files for bankruptcy, federal law takes precedence over state law, which is because the United States Constitution empowers Congress to establish uniform Laws on the subject of Bankruptcies throughout the United States . The federal bankruptcy power ensures state uniformity, facilitating interstate business and ensuring the nations economic stability. Several debtor-creditor matters that dont clash with or are not handled by federal bankruptcy law remain within state jurisdiction.
Railroad Receivership And The Origins Of Corporate Reorganization
Unlike the credit supplied by merchants and manufacturers, much of the debt of railroads was secured. For example, bondholders might have a mortgage that said they could claim a specific line of track if the railroad failed to make its bond payments. If a railroad became insolvent different groups of bondholders might claim different parts of the railroad. Such piecemeal liquidation of a business presented two problems in the case of railroads. First, many people believed that piecemeal liquidation would destroy much of the value of the assets. In his 1859 Treatise on the Law of Railways, Isaac Redfield explained that, The railway, like a complicated machine, consists of a great number of parts, the combined action of which is necessary to produce revenue. Second, railroads were regarded as quasi-public corporations. They were given subsidies and special privileges. Their charters often stated that their corporate status had been granted in exchange for service to the public. Courts were reluctant to treat railroads like other enterprises when they became insolvent and instead used receivership proceedings to make sure that the railroad continued to operate while its finances were reorganized.
Table 3. Railroad Receiverships, 1870-1897
Source: Swain, H. H. Economic Aspects of Railroad Receivership.Economic Studies 3, : 53-161.
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United States Bankruptcy Courts 101
Bankruptcy courts are part of the federal judicial system. This means bankruptcy proceedings are governed by federal law. Bankruptcy is handled by specially designated bankruptcy courts in the fifty states, the District of Columbia, and Puerto Rico.
Within larger or more populous states, the bankruptcy courts are divided into districts that serve smaller geographic areas. Each state and district has its own local rules, forms, and opinions that may impact how your case is handled.
If you live in a state with more than one district and are unsure which district you are in, most of the bankruptcy court websites provide lists or maps of counties within that district.
Before you file your bankruptcy petition, make sure you have listed every creditor you owe money. Failure to do so can result in the dismissal of your bankruptcy petition. Lying on a bankruptcy petition can result in a jail sentence for fraud.
Pennsylvania Bankruptcy Exemption Timing Rules
It’s tempting to move to a state with significantly more generous bankruptcy exemptions when filing for bankruptcy. But it doesn’t work that way. 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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Choice Of State Law In Bankruptcy Cases Part I
FeatureJournal Article: ErieKlaxon Co. v. Stentor
Let us take a simple example. A trustee in a Delaware bankruptcy case files an objection to a landlord claim for damages arising from the breach of a lease of California real property on the grounds that the landlord has failed to mitigate damages by releasing the property. Ask a bankruptcy lawyer what law we should look at in determining whether the landlord has failed to mitigate, and the answer is invariably: “Why, California law, of course.” Everyone knows that mitigation is a state law issue, and in real property matters the law of the state where the property is located should apply. It is too easy. It is so easy, in fact, that we do not recognize that we are applying choice-of-law analysis to reach the result. The choice-of-law analysis is as follows. First, we ask the “Erie” question: “Is mitigation a question of federal law or state law?” The proceeding is in federal bankruptcy court, and an objection to claim is a matter of federal bankruptcy law, but the defense of mitigation does not seem to invoke any strong federal policy. We therefore conclude that state law will apply.
A Law School Primer on Basic Federal/State Choice-of-law Issues: The Erie Doctrine and Klaxon Co. v. Stentor
Vanston Bondholders: Support for a Federal Choice-of-law Rule?
Cases Choosing Federal Choice-of-law Rules
Ninth Circuit Follows a Federal Choice Rule: Lindsay
SMEC: The Policy of the Federal Choice-of-law Rule Articulated
When Should I Declare Bankruptcy
When asking yourself Should I file for bankruptcy? think hard about whether you could realistically pay off your debts in less than five years. If the answer is no, it might be time to declare bankruptcy.
The thinking behind this is that the bankruptcy code was set up to give people a second chance, not to punish them forever. If some combination of bad luck and bad choices has devastated you financially, and you dont see that changing in the next five years, bankruptcy is your way out.
Even if you dont qualify for bankruptcy, there is still hope for debt relief. Possible alternatives include a debt management program, a debt consolidation loan or debt settlement. Each one of those choices typically require 3-5 years to reach a resolution, and none of them guarantees all your debts will be settled when you finish.
Remember that bankruptcy carries significant long-term penalties. It is stuck on your credit report for 7-10 years, which can make getting loans in the future very difficult.
The flip side of that is there is a great mental and emotional lift when all your debts are eliminated, and youre given a fresh start.
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Types Of Federal Bankruptcy Proceedings
Federal bankruptcy law provides two distinct forms of relief: liquidation and rehabilitation, also known as reorganization. The vast majority of bankruptcy filings in the United States involve liquidation, governed by chapter 7 of the Bankruptcy Code. In a chapter 7 liquidation case, a trustee collects the debtor’s nonexempt assets and converts them into cash. The trustee then distributes the resulting fund to the creditors in order of priority described in the Bankruptcy Code. Creditors frequently receive only a portion, and sometimes none, of the money owed to them by the bankrupt debtor.