If you are considering filing a bankruptcy case under Texas chapter 7, you need to understand what impact filing will have on your current and future financial health. Knowing how the process works and what assets will be affected is critical in helping you decide whether Chapter 7 is the right resolution for you.
Do you need to file a chapter 7 bankruptcy?
It is not always prudent for someone suffering through a financial slump to file for bankruptcy. There are 3 general rules that apply in bankruptcy proceedings that can make or break your decision.
Property
Bankruptcy typically involves relinquishing property to pay your creditors. You need to consider if you are willing to have certain pieces of your property taken, such as bank accounts and family heirlooms, among others.
In Texas, the laws are quite liberal about what falls under the exemption category. Property that is exempt is not allowed to be used to pay creditors.
For example, all of the following properties are exempt under Texas law within specified limits:
- current wages;
- pensions;
- homestead;
- home sale;
- motor vehicle;
- personal property; and
- jewelry.
Non dischargeable debts
This type of debt is considered by the court to be non-negotiable. Even if you successfully complete a Chapter 7 bankruptcy case, you still will be responsible for paying nondischargeable debts.
Typically, nondischargeable debts will include:
- income taxes for less than 3 years;
- student loans;
- child support;
- payment for luxury items; and
- court judgments.
Other debts that may be ruled nondischargeable often involve:
- fraud;
- theft;
- embezzlement;
- details outlined in divorce decrees; and
- malicious injury to individuals or their property.
If most of your debt is nondischargeable, there may be no reason for you to file for bankruptcy because you will have to repay it anyway.
Debts Requiring a Court Judgment
Does most of your debt revolve around a creditor needing to secure a court judgment in order to begin collection procedures? If so, do you have income or property that can be seized if a court order is granted?
Your answers to these questions are important. Some individuals may fall under what is known as “judgment proof,” meaning that even if a court rules in a creditor’s favor, there are no assets that can be seized.
The Process of Filing a Chapter 7 Bankruptcy Case in Texas
The filing of a Chapter 7 bankruptcy case means you will be selling your non-exempt assets and paying your creditors with the proceeds.
Before beginning the process of filing a bankruptcy case, you need to consider the following:
- determine if you qualify. Your income must be less than the Texas median level to qualify to file Chapter 7. If not, you will need to take the Chapter 7 means test to find out your monthly disposable income and whether it qualifies.
- examine your debt – you will need to assess your debt. Not all of your outstanding expenses will be cleared, including purchases of recent luxury items, income taxes for less than 3 years and other non dischargeable debts.
- find an attorney – although you are not required to hire an attorney, having one can mean the difference between an easy, successful bankruptcy case and a difficult, drawn-out process that could put your assets at risk. A Texas bankruptcy case under the guidance of experienced attorneys can take as little as 4 to 6 months to complete.
There are a few dozen bankruptcy forms to fill out and file to begin your petition for a bankruptcy case, these will detail all your:
- expenses;
- income;
- debts;
- property; and
- a list of your creditors.
It can be quite cumbersome and time-consuming to complete, which is why a bankruptcy attorney can help with your Chapter 7 bankruptcy case.
Bankruptcy Attorneys Can Help
Making the decision whether to file a Chapter 7 bankruptcy case is never easy. The experienced bankruptcy attorneys at Warren & Migliaccio, L.L.P. understand. They will do what they can to protect your assets and make the process as painless and simple as possible for you. Give them a call at 1-888-584-9614.
