Struggling with debt can be overwhelming and getting out from under it shouldn’t be. Eliminating debt is an important step on the road to achieving financial freedom and I look forward to helping you establish a fresh start through Chapter 7 bankruptcy.
Chapter 7 bankruptcy lets you discharge unsecured debts such as credit card debt, personal loans, and medical bills to name a few. Also, worth noting is most who file Chapter 7 bankruptcy do not have to give up any property and after debts have been discharged, you are no longer responsible for those debts.
Having said that, be mindful if you are significantly behind on your mortgage or car payments, filing Chapter 7 bankruptcy in Texas may not shield you from repossession or foreclosure. I would have to take a comprehensive look at your financial situation and advise you on whether filing Chapter 13 bankruptcy may be a more advantageous option for you.
Qualifying for Chapter 7 Bankruptcy & Who is it for?
Eligibility to file for Chapter 7 Bankruptcy requires meeting certain income requirements:
- If your yearly income is lower than the median income in Texas for a household of your size, you likely automatically qualify for Chapter 7 bankruptcy filing.
- If your yearly income is above the median, you must then pass the means test. The means test determines if your debts and expenses are beyond your ability to pay them back. If the result of the means test indicates you can afford to pay your debts, you can pivot from a Chapter 7 bankruptcy filing to considering a Chapter 13 bankruptcy or perhaps even a debt settlement strategy. Everything depends on your unique circumstances.
- Lastly, if you have filed for Chapter 7 bankruptcy in the previous 8 years and received a discharge, you are not eligible to file again at this moment, but there are other options for you.
Chapter 7 bankruptcy is a viable option for people who:
- Have heavy medical bills and/or credit card debt
- Are inundated with collection agencies pursuing them
- Lack sufficient income to pay off their bills
- Have little if any property or are current on car & house payments
- Have a an unfavorable (low) credit score (Want to start rebuilding their credit score)
If Chapter 7 bankruptcy seems like a helpful path for you, call me, I offer a free consultation and evaluation of your income, assets and debt and can determine whether you meet the requirements for filing Chapter 7 bankruptcy.
Chapter 7 Bankruptcy & Property
A downside of bankruptcy can be the loss of nonexempt property (some, not necessarily all). Fortunately, Texas law allows for exemptions, properties that you can protect and shield from being taken from you. Property exemption include:
- A house with up to 20 acres of residential land use, of unlimited value, that you own, also known as a “homestead”. A manufactured home on rented land also qualifies, as long as you own the home.
- Personal property (things other than real estate), jewelry, furnishings, clothing, etc. Exemptions for personal property cannot exceed a total of $50,000 for those who are single, $100,000 for those who are married and or have a family.
- Social security, most retirement/pension accounts and life insurance policies.
Texas residents have the option to choose between using Texas or federal exemptions to protect their property. Federal exemptions cover most of the same items but in varying amounts. For instance, federal exemptions only cover up to $27,900 of equity in your homestead and $55,800 for a couple. However, federal exemptions offer a wild card exemption of $13,900 (per filer) to protect any asset not already
The items that categorically fall under exempt “personal property” are extensive, but limitations are set and everyone’s situation is unique. Under Texas exemptions, pets plus their food, up to two horses, firearms, tools, and more all can be exempted. If you call me with a question of your situation, I will be pleased to let you know if the item is exempted.
Because Chapter 7 bankruptcy lets you discharge your debt and start from scratch, it comes at great expense to creditors and thus its filing is not taken lightly by the court. It requires skillful navigation in seeing it through successfully and I will guide you through the process and achieve the best possible outcome for your fresh start.
Required Education & Filings
Required Credit Counseling Prior to Filing Chapter 7 bankruptcy in Texas
Prior to filing bankruptcy, the court requires you to attend an online consultation session with an approved credit counseling non-profit that will work with you in performing a budget analysis. Generally, this expense is approximately $25, contact me via phone or email to get a listing of available places in Austin, TX providing this service.
Bankruptcy Petition Filing, Statement of Financial Affairs, and Statement of Intent
One of the most time consuming and tedious aspects of filing for Chapter 7 Bankruptcy is collecting all the detailed paperwork, facts and figures that is required. Typically, it’s sensible to create an inventory of all your assets and then in detail define their fair market value. This may include:
- Cash
- Annuities and CDs
- Checking and savings accounts
- Profit sharing accounts
- Pension, 401k, IRA, or other retirement accounts
- Insurance policies, stocks and corporate or government bonds
- Houses, land, condos and vacation homes
- Motor vehicles, watercraft and aircraft
- Jewelry and clothing
- Furniture, computer equipment, electronics and other household goods
- Deposits you’ve placed with landlords and utility companies
- Collectible items such as antiques, books, art, etc.
- Sporting equipment, photographic equipment and firearms
- Any money that is owed to you, such as tax refunds, outstanding personal loans, etc.
- Divorce property settlement documents
- Alimony and child support
- Any patents, copyrights or trademarks you own
Be mindful attempting to hide assets is unlawful and any court awarded discharge of debts may be revoked if at a later point it is discovered and determined your disclosure was a misrepresentation of your full and complete financial profile. The submission of documents carries the same legal effect as providing testimony under oath in court. Hence, we want to have complete certainty that the documents are complete and error free upon submission to avert claims of fraud down the line.
Additionally, to the list of assets, you’ll need to compile a list of liabilities, an income report, current expenses, a schedule of any active contracts, a copy of your most recently filed Federal tax returns, proof of credit counseling compliance and any listing of properties. Be mindful any debts not documented on your bankruptcy schedules filed will not be discharged.
Once a case is filed (electronically), an injunction or “automatic stay” goes into effect prohibiting creditors, landlords, spouses, and government entities from taking any further collection or debt recovery action toward you or going forward on any civil litigation without first obtaining approval of the bankruptcy court. For example, a foreclosure and or a paycheck garnishment is halted, and a repossessed item could be returned to you - it all depends on circumstances.
Debtor Financial Education
Once your case is filed, but prior to receiving a discharge, a second course titled “Debtor Financial Education” must be completed. Call or email me to receive a list of places you can take this course online. Also note failure to complete the course will result in the case being closed without receiving a discharge.
Meeting Creditors & Discharge
Section 341: Meeting of Creditors
What is commonly referred to as the section “341 meeting” takes place within the first 45 days of the case. As an independent person appointed automatically in all Chapter 7 bankruptcy cases, a “trustee” will go over the information I prepare on your behalf to confirm “compliance” with the bankruptcy code. The trustee will confirm that the information is in order, complete, and accurate.
In Austin, Texas, if your documents are in full compliance, the Chapter 7 trustee will conclude your meeting. The Trustee will determine whether you have assets to liquidate. If you don’t have any nonexempt assets, he will file a “No Asset” Report giving creditors notice of no distribution. Attendance of creditors at this meeting is uncommon and the meeting generally goes by quickly with documents in good and proper order. Typically, you should receive your discharge approximately 60 days after the 341 meeting.
Time for Objections to Discharge
Property claimed exempt can be reviewed and objected to by both the creditors and trustee up to 30 days after the “341 / meeting of the creditors”. Once the 30-day term has transpired, your exemptions will be allowed.
The creditors have a 60-day term starting after the date first set for your meeting with the Trustee, to file a complaint of objection to their debt’s discharge, or to your entire Chapter 7 discharge. This can be mounted on claims of false statements on a credit application, willful or malicious injury to a person or property of a person, or fraud for example.
While objections are not usually filed, if a creditor does file an adversary complaint, a trial is held. Should this arise, you will need to decide whether you want to defend the action, settle it, or simply let it go to default judgment. If I sense the creditor is going to win, I will encourage you to settle. If I feel the creditor has no case, I will advise seeking defending the action in trial The adversary is a separate law suit and is not covered under the original bankruptcy fee.
Discharge
When no one objects to a discharge, people commonly receive a Notice of Discharge by U.S. Mail about 2 months after the 341 meeting of creditors. This notice affirms your discharge from all the dischargeable debts. However certain debts cannot be discharged, such as alimony, child support, student loans, certain taxes, etc.
Be clear on how the discharge applies to all the dischargeable debts scheduled in your bankruptcy petition. If a creditor was missed and not included, you may need to reopen your case, add the missing creditor, and separately discharge that creditor. However, should you need to reopen your case; additional fees and costs may apply. Therefore, it’s very important to identify and include all creditors at the start of your case.