If you are considering a chapter 7 or 13 bankruptcy the Western District of Texas, but are unsure what options are available, I am an Austin bankruptcy attorney that can help. Filing for bankruptcy can relieve feelings of frustration and anxiety, make the collection calls go away, and help end repossession in Texas.
Following is a brief explanation of the most common concerns I see with respect to filing bankruptcy in Texas with regards to Chapter 7, Chapter 13, repossession, foreclosure, exemptions, medical debt, and divorce. This is not the complete and only areas of services I provide, simply the most frequently asked about. Call me if you have a question about something you do not see addressed here.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also known as a “straight” or “liquid” bankruptcy and an option for individuals, married couples filing individually or jointly, and businesses including corporations. From the filing date to the discharge being in effect, Chapter 7 bankruptcy in Texas is commonly a 90 day process.
In most cases, those filing Chapter 7 bankruptcy in Texas are allowed exemptions enabling them to keep personal property along with their homestead. Creditors are not allowed to take exempted property from you and sell it to pay off your debts. Non-exempt property is transferred to your trustee (who will be assigned to the case by the court) where it is sold and proceedings used to pay your creditors.
Be mindful there are Texas bankruptcy exemptions and federal bankruptcy exemptions, with differences between the two sets of bankruptcy exemptions. By law in Texas, you’re allowed to choose which set of exemptions (Texas or federal) deliver you the most benefit and that you choose to proceed with. This can get a bit complex and part of my services to you is to unpack your personal circumstances, assess and advise you accordingly. For a deep dive into Chapter 7 Bankruptcy in Texas, click here to my page focused on Chapter 7 Bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also referred to as “debt adjustment for regular wage earners,” enables you to repay your debts over a term of 3 - 5 years. Submission of a plan to the court is required detailing your proposed repayment to your creditors. Assuming the court approves of the proposed plan, your payments are issued to the Trustee of the case who then distributes repayment accordingly to your creditors. The law incentivizes filing for Chapter 13 bankruptcy by permitting discharge of more types of debts than what’s possible under Chapter 7 Bankruptcy. For a deep dive into Chapter 13 Bankruptcy in Texas, click here to my page focused on Chapter 13 Bankruptcy.
Repossession in Texas
Texas law enables a creditor with a lien upon personal property to repossess the collateral if pursuant to the terms of the contract, the purchaser is in default (behind on secured loans like car payments). Notice of intent to repossess is not required by the creditor before they take the collateral.
If your car is repossessed the financing company (creditor) may sell the car at auction, but you can still end up owing on the initial loan if the car sells for less than the balance due on your car loan (plus the usual fees that come with car repossession). This would also apply if you voluntarily surrendered the car, and the debt also applies to any co-signers on the car loan.
Filing a chapter 13 bankruptcy can halt repossession or even possibly have your car returned if it has been repossessed and not yet sold. Filing chapter 13 bankruptcy enables you to restructure your debt paying it off over time, possibly at a lower interest rate or reassessed for the car’s current fair market value. It’s also quite possible surrendering your vehicle in Chapter 7 bankruptcy gives you the most advantageous benefits depending on the larger picture of your circumstances and situation. The best path for managing a repossession is going to hinge on your unique circumstances, but for sure, timing is critical, so it is important to contact me as soon as possible if you are facing repossession in Texas.
Foreclosure in Texas
Falling behind on payments of mortgages, deeds of trust, or other security interest, runs the risk of foreclosure, forcing a sale of the property. The situation often worsens if the property is over-financed resulting in a sale producing insufficient funds to pay off the loan (a short sale), leaving you on the hook for the balance. I take a lot of pride in helping financially distressed Texans fight foreclosures and keep their homes.
Most, mortgage companies cannot start foreclosure proceedings until a loan is delinquent for at least 120 days. Although 120 days or four months of payments may seem like a fair amount of time, once proceedings have begun, foreclosure can happen very quickly in Texas. This is because home foreclosure actions are non-judicial in Texas, meaning the lender can legally foreclose without first going to court providing the deed of trust contains the authority for a “power of sale clause.”
Bankruptcy filing in Texas places an automatic stay on efforts to collect thereby temporarily halting foreclosure. Chapter 13 bankruptcy lets you repay late payments over time plus reorganize other debt, eliminate, or reduce medical bills, credit card debt, and other unsecured loans. All this can result in freeing up money that you can now direct toward mortgage payments to avoid losing your property.
Filing Chapter 7 bankruptcy can fend off foreclosure if your mortgage payments are current (or close to current) and eliminating your unsecured debt leaves you with enough disposable income to catch up and or maintain your mortgage. Even if you actually are not interested in keeping your home, Chapter 7 bankruptcy can be a helpful strategy to preserve financial stability.
The most prudent approach to managing foreclosure in Texas is going to depend entirely on your unique circumstance, goals, and objectives. If foreclosure is a bridge, you sense you may be crossing, contact me as soon as possible and I can help you understand your options and how to possibly avoid foreclosure.
Exemptions, Medical & Divorce Debt
Exemptions in Texas
Texas exemption laws used in bankruptcy require you to have lived in Texas for at least two years prior to filing. If you cannot meet that requirement the only State exemption laws available to you to use would be those of the state of where you used to live. This can become complicated since some states disallow you to use their exemptions if you don’t live in their state. Per the bankruptcy code you can use the Federal Exemptions if this is your circumstance. Generally for homeowners filing bankruptcy, the Texas exemptions present the better set of exemptions to claim, Renters generally are more advantaged under the Federal exemptions. These itemized listings of Federal and State of Texas exemptions are lengthy, reach out to me and I would be happy to email you the information.
Medical Debt
Medical debts, in nearly all circumstances, are categorized as “general unsecured debts”. As these debts are not secured they are treated less favorably in either Chapter 7 or Chapter 13 than secured and priority debts. The moment your bankruptcy is filed, medical debt creditors must halt all collection efforts, including lawsuits. and bank account garnishments. Filing Chapter 7 can almost always have those medical debts completely discharged, you will not have to pay them. In filing with Chapter 13, unsecured debts receive payment through the Chapter 13 plan, but only to the measure where there is money left over (generally minimal if any).
Divorce Debt
Although each case is unique, filing a joint Chapter 7 bankruptcy prior to filing for divorce is generally the most expedient and equitable option. Having said this, bankruptcy isn’t always the most prudent and sensible way to reduce if not erase debt. If you’re thinking bankruptcy may be a viable option for you, consider the following before filing for divorce.
Again, circumstances vary but what if you filed Chapter 7 or Chapter 13 bankruptcy post-divorce? . In Texas any asset you or your spouse obtained during your marriage is recognized as community property, and each of you have a 50% interest. There is no community debt, so debts incurred by one spouse alone are his/her own obligation. However, if both spouses incur the debt (sign the contract) both are equally and severally liable for the full amount.
If your ex-spouse files for bankruptcy post-divorce, you remain responsible and be on the hook for jointly held debt. Creditors can pursue you for full repayment of the outstanding debt. Further, any transfer of assets 2 years prior to filing are required to be disclosed to the Trustee. This includes property transfers in a divorce settlement. In some cases, it is prudent to file for bankruptcy before filing for divorce. This area of Texas bankruptcy law can spiral into numerous directions of risk exposure, everyone’s situation is unique, so definitely call me if this is a bridge you sense you’ll be crossing.