How Bankruptcy Works In Texas
In most respects, filing for bankruptcy in Texas isn’t any different than filing in another state. The bankruptcy process falls under federal law, not Texas state law, and it works by unwinding the contracts between you and your creditorsthat’s what gives you a fresh start.
But Texas’s laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You’ll also need to know other filing information, which we explain after going over some basics.
What Cant Be Done Through Chapter 7
A Chapter 7 bankruptcy CANNOT:
- Discharge past-due child support, property taxes, recent IRS debts, and most student loans.
- Protect you from “hot check” or other criminal charges, or waive criminal fines, fees, penalties and restitution.
- Discharge debts that arise after the bankruptcy has been filed.
- Eliminate the obligation of a co-signer on your loan in most cases.
- Eliminate creditors rights to secured property like car loans and home mortgages. Chapter 7 can discharge the debt, but not the creditors lien or legal claim. After bankruptcy, your home can still be foreclosed and your car repossessed if you dont make payments.
Get Help From A Texas Bankruptcy Attorney
If you are considering bankruptcy, talk with attorney Erin B. Shank about your options. Erin has been practicing exclusively bankruptcy law in Texas for almost 40 years. She has represented literally thousands of Texas, just like you, to find honorable solutions to their debt and credit challenges. Contact our office for a free, virtual, initial consultation to explore your bankruptcy options.
Erins office is proud to be the only totally virtual bankruptcy law office in Central Texas. During these challenging times as one live in a Global Pandemic, filing bankruptcy with Erin is safe and convenient. to schedule your free, virtual, initial consultation.
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Collect Your Texas Bankruptcy Documents
Your first step should be to collect the documents youâll need during the bankruptcy process. Some documents, like your paycheck stubs, medical bills, collection letters you have received from creditors, and a recent copy of your credit report will be useful when filling out your bankruptcy forms.
Other documents, like the tax returns you filed in the 2 years before filing bankruptcy will need to be submitted to the bankruptcy trustee before your meeting of creditors. If youâre closing a bank account before filing your bankruptcy, make sure you get a complete copy of your bank statements for the 6 months before the account is closed. Your bankruptcy trustee may want to review your statements, and once an account is closed, it can be time consuming and even expensive to get them from the bank.
Try to be as organized as possible when collecting the documents for your Texas bankruptcy. It may take you a while to collect everything but when youâre ready to take the next step, youâll feel more prepared.
What Happens To My Credit If I Declare Bankruptcy
When you declare bankruptcy, it’s a sign that you are no longer paying your debts as originally agreed, and it can seriously damage your credit history. That said, the two types of bankruptcy aren’t treated the same way. Because chapter 7 bankruptcy completely eliminates the debts you include when you file, it can stay on your credit report for up to 10 years.
While chapter 13 bankruptcy is also not ideal from a credit standpoint, its setup is viewed more favorably because you are still paying off at least some of your debt, and it will remain on your credit report for up to seven years.
Shortly after your bankruptcy is discharged by the courtmeaning you no longer owe the debts you’ve included in your filingit may be difficult to get approved for credit, especially with favorable terms. There are some lenders, however, who specifically work with people who have gone through bankruptcy or other difficult credit events, so your options aren’t completely gone.
Also, the credit scoring models favor new information over old information. So with positive credit habits post-bankruptcy, your credit score can recover over time, even while the bankruptcy is still on your credit report.
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What Happens If I File For Bankruptcy Before An Eviction
In order to remove you from the premises, your landlord must file a suit against you and state the reason why they want to reclaim possession of the premises. This is called an eviction proceeding. The court will rule on the legality of the eviction and make a determination as to if an when you will be removed from the landlords apartment.
When you file for bankruptcy, any such action against you must stop. If youve filed for bankruptcy before the landlord could file for eviction, then the eviction would either be postponed until after the bankruptcy has settled or the landlord has the choice to petition the court to lift the automatic stay granted by the bankruptcy.
Bankruptcy And Custodial Parents
If you are a custodial parent currently receiving child support and the noncustodial parent has filed for bankruptcy, you may have questions about how this can affect you.
Will I still receive child support?
Filing for bankruptcy does not end the noncustodial parents child support obligation. However, the noncustodial parent may request a payment modification.
Bankruptcy alone does not qualify them a lower payment.
- Learn more about child support modifications on our modifications page.
What if I’m not receiving payments?
If your childs other parent stops paying child support, the Office of the Attorney General will use several methods to enforce their child support responsibilities.
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What Are The State Exemption Laws In Texas
Assume that, about a dozen years ago, Carole bought a large house. When the restaurant she owned closed due to COVID, she fell behind on mortgage payments. Now, she is afraid that she will not only lose her house but lose all the equity she has built up over the years.
People like Carole should consider filing bankruptcy and using state exemptions. The automatic stay stops foreclosure proceedings dead in their tracks. As for property exemptions, Carole can protect her:
File Your Bankruptcy Petition
When preparing the bankruptcy petition and schedules, you must accurately describe your financial situation, including income, expenses, property, and debts. Our Firm provides the necessary intake forms to facilitate this important process. Bankruptcy is all about disclosures. The need for total accuracy is critical to obtain approval from the Court and avoid issues in the case. A qualified attorney can guide you through this process and ensure everything is submitted as accurately as possible.
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Credit Will Be More Expensive And Limited
After declaring bankruptcy, youll have to work hard to raise your credit score. You will likely face limited access to credit and very high interest rates until you can rebuild your financial reputation. It may not be at the top of your mind, but your credit score plays a role in many functions, including what youll pay for car insurance, where you can live, and the rates youre given for credit cards. Fortunately, there are ways to repair your credit score and get back on track. It just takes time.
Means Testing In Texas
In Texas, you will need to undergo a means test. This will compare your income with the median household income in Texas, in relation to the size of your household. You will be eligible to file for Chapter 7 if your current income falls below the median income level. Should your income be above the median, you will be allowed to deduct payments and expenses from secured debts, in order to try and qualify.
In Texas the median income for a single person is currently set at $39,673. For a married couple with 1 child the median is $57,825. Consulting with a Texas bankruptcy attorney will help you to understand the different median levels that are available, and ensure that you are deducting all eligible expenses that will give you the best outcome.
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Chapter 12 Bankruptcy For Texas Farmers And Ranchers
Chapter 12 of the U.S. Bankruptcy Code is a specialized type of bankruptcy designed for family farmers, ranchers, dairy owners, poultry and livestock producers, as well as family fishermen. It helps you save your farm and business by allowing you to reorganize your finances, reducing and restructuring your debt.
If you qualify, Chapter 12 provides some very important benefits, often better than those available in either Chapter 13 or Chapter 11, the other two possible options for reorganizing a business.
Qualifying For Chapter 12 Bankruptcy
You as an individual, you and your spouse, or the corporation or partnership in which you are an owner can file a Chapter 12 case only if the individual or business entity filing the case meets the special definitions of a family farmer or family fisherman with regular annual income found in subsections 101 and of the Bankruptcy Code. For farmers and ranchers, here are the qualifications:
- Debt limit: total debt of no more than $3,792,650.
- Farming debt ratio: at least 50% of the total debt of the individuals or business entity is from the farming operation ), excluding the debt on the principal residence .
- Farming income ratio for individuals: more than 50% of the gross income must have been received from the farming operation.
- Ownership: more than 50% of the business ownership must be in one family, or in that family and its relatives.
- Asset ratio: more than 80% of the entitys assets must be from its farming operation.
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Debt Relief In The Bankruptcy Process
Most individuals considering bankruptcy hope to wipe out their debts, and bankruptcy can eliminate many consumer debts, like credit card balances and medical bills. If a debt is secured by an asset, the asset is collateral for that secured debt and will be forfeited. That means, for example, that if an individual bought a home with a mortgage, the mortgage lender has the authority to take over the asset and sell it to cover missed payments. This is usually the case for car loans for financed vehicles as well.
It’s also important to recognize that not all debts will be discharged in bankruptcy. Some debts are termed nondischargeable. These include spousal and child support arrears, recent tax bills and most student loan debt absent a prior lawsuit that was successful.
Can I Discharge My Student Loan Debts Through Bankruptcy
While it may be exceedingly difficult to do so, it is possible to discharge student loans through bankruptcy. In order to be eligible, however, individuals must be capable of demonstrating that the continued payment of their student debt will create excessive an undue financial hardship for themselves and their dependents.
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Chapter 13 Debt Consolidation Plan
A Chapter 13 Bankruptcy allows you to propose a plan to repay most or all of your debt to your creditors over a 3-5 year period. Potential candidates for Chapter 13 include individuals and businesses with significant equity in assets and wage earners with disposable income who did not qualify for Chapter 7. You will qualify for Chapter 13 as long as your unsecured debt is less than $360,475 and secured debt is less than $1,081,400.
Chapter 13 can be used to:
- prevent a house foreclosure
Are There Alternatives To Bankruptcy
Yes. Doing nothing is an option if you are judgment proof. If your property and income are exempt from creditors claims by law, then you have nothing the creditors can take from you. With the exception of past due child support, you can’t be put in jail for failing to pay a debt. If you are not judgment proof, you can negotiate a payment agreement with your creditors before filing for bankruptcy. The Federal Trade Commission has tips on credit counseling at .
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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!
When You Stop Paying On A Credit Card
When you stop paying on a credit card, you will first be hearing from the banks internal collection apparatus, both by telephone and by mail. At first, the most unfriendly staffers will call you, simply demanding that you pay them. After a while, the matter is referred to callers who will seem to be more willing to listen to your problems and will try and work out a payment arrangement with you. This is sort of a good cop, bad cop type of arrangement. At some point you might even hear from callers who will try and make a deal for partial payment.
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Will Bankruptcy Affect My Job Or Future Employment
Twenty-nine percent of employers run a credit check on new job applicants, according to a survey by CareerBuilder. As a result, declaring bankruptcy could affect your ability to get a new job, especially if that job is in the financial services industry or with a government entity.
They do this primarily to make sure you’re a good fit for the jobssuch as handling moneyand that you’re not financially stressed, which could increase the likelihood of theft or fraud.
If an employer simply runs a routine criminal background check, however, your bankruptcy won’t show up.
It’s less likely that employers would conduct background checks on current employees. So if you’re not planning to switch jobs, you likely don’t need to worry much about a bankruptcy affecting your employment.
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.
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What Is An Emergency Filing
An emergency filing allows you or your lawyer to file an incomplete bankruptcy in order to activate the automatic stay. You can file the rest of the paperwork later. In other words, the court doesnt require that you have every piece of information in order to stop creditor actions against you. Moving quickly is your best chance to stop an eviction or buy yourself enough time to repay the delinquent rent that you owe.
Am I Eligible To File Bankruptcy In Texas
All bankruptcy debtors must complete a pre-filing credit counseling course and a post-filing debt management course. Additionally, as mentioned, people who want to claim Texas exemptions must be long-term Texas residents. Federal exemptions have residency requirements as well, but these requirements are usually only a few weeks.
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Where Bankruptcy Doesnt Help
Bankruptcy does not necessarily erase all financial responsibilities.
It does not discharge the following types of debts and obligations:
- Loans obtained fraudulently
- Debts from personal injury while driving intoxicated
It also does not protect those who co-signed your debts. Your co-signer agreed to pay your loan if you didnt, or couldnt pay. When you declare bankruptcy, your co-signer still may be legally obligated to pay all or part of your loan.
A Boerne Tx Bankruptcy Attorney Can Help You Keep Your Vehicle
If you are filing for a Texas bankruptcy and you are concerned about whether or not you will be able to keep your vehicle, the best thing to do is to contact a knowledgeable . At the Law Offices of Chance M. McGhee, we can help you understand your rights when it comes to bankruptcy exemptions and your vehicle. Call our office today at 210-342-3400 to schedule a free consultation.
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Discharge All Debts That You Want To
In most Chapter 7 cases, all debts are discharged legally written offwith certain exceptions.
There are two kinds of exceptions, one that involves your right to a discharge of ANY of your debts, and another that involves your ability to discharge certain specific debts.
In the unusual event that a debtor hides assets or lies to the bankruptcy court or trustee in some other significant way, that debtor could potentially lose the ability to get a discharge altogether. Also, filing a new bankruptcy case too soon after an earlier one could result in no discharge of debts in the new case.
Certain specific kinds of debts are never dischargedchild and spousal support, for example. Some kinds of debts which are only discharged under very specific or limited circumstancesincome taxes and student loans, for example. Finally, there are debts which are discharged unless a creditor raises and proves the existence of specific conditionsfor example, a loan that was procured through the debtors misrepresentations.
In the simplest Chapter 7 case, you qualify for a discharge, and all your debts are in fact discharged.