Texas Bankruptcy Timeline
What Are You Going To Require?
To file bankruptcy in either Chapter 7 or Chapter 13, you will be instructed to produce a number of things. You must produce these items and it would be a bad idea if you tried to hide information from the bankruptcy trustee. It can lead you your bankruptcy being rejected and/or legal penalties. Do not try to manipulate information as you will be caught.
- You are going to need a breakdown of all your sources of income
- A list of all recent major financial transactions
- How much your income is each month
- Your monthly budget
- What secured debts do you have
- What unsecured debts do you have
- List of ALL your assets
- Your tax returns for the previous two years
- Deeds to your home
- Title documents
When You File
When you file for bankruptcy, you are going to write a petition for bankruptcy. While you do not have to employ legal counsel, it typically works out much better if you do. In Texas, it will probably cost you between $950 and $2,000 to employ an attorney.
The Automatic Stay
The moment you file for bankruptcy, an automatic stay will normally kick in straight away. This puts an end to your creditors contacting you and trying to collect debts. It will also put a hold on any foreclosure action that is taking place. This immediately takes the pressure off you and reduces stress. If a creditor does not immediately stop they would be punished, so they do cease activities at this point.
Your Bankruptcy Trustee
When you file for bankruptcy in Texas, they are going to assign you a bankruptcy trustee. Their task is to review the information you provided and review your budget. He/she can then calculate how much your creditors are likely to get (if indeed they get anything).
Section 241 Meeting
About a month after filing the court will call a Section 341 meeting. This meeting typically lasts about 5 to 10 minutes and allows the trustee's office to meet the debtor and go over the bankruptcy plan. In most cases, the creditors do not attend. If a plan cannot be set up then the judge will step in and create a plan.
Keeping Your Property
In Texas, in a simple Chapter 7 bankruptcy, everything you own is going to be exempt. The property is protected from the trustee and the creditors. You get to keep it. In Texas, you can choose whether to use the state exemptions or the federal exemptions, but the reality is that Texas state exemptions are so generous, you will almost certainly choose them (although there are rare cases where it might be the reverse).
When You Will Not Get Discharges
There are a couple of situations where typically a discharge occurs but is denied to you. If you hide assets or lie to the bankruptcy court, you will lose the opportunity to get a discharge. If you have filed a bankruptcy case too soon after a previous one, then the court may not discharge debts in the new filing.
When A Creditor Objects To Discharge
There are certain situations where you will by default get a discharge, but if the creditor objects you may not. An example might be where you had got a loan by misrepresenting certain facts to the creditor. The creditor has to prove this to the judge. If they don't object, then these debts will be discharged along with all the others.
Certain Kinds Of Debt Will Not Get Discharged
There are certain types of debt that will not be exempted Examples of these are:
- Student loans
- Income Taxes
- Child and spousal support
Chapter 13 Bankruptcy In Texas
In Texas, when you file Chapter 13, you and your attorney propose a repayment plan, which is based on your ability to pay. Debts are sorted by a specific formula, and some debts are given priority. This plan will result in a situation where you only repay some of your debts over the three to five years of your repayment plan.
The plan confirms how much you will repay each month, based on the law which controls which debts get paid back first. Priority debts like unpaid taxes or alimony will get paid back in full as they are "priority debts." Next come the "secured debts" which may be paid in full, depending on the situation. Then finally "General unsecured debts" are only paid back if there is enough money to do so, and typically do not get repaid.
In Texas, Chapter 13 is more popular than Chapter 7 (not the case nationally) because of Texas State Exemptions. With Chapter 13 the following applies:
You get up to five years to get your mortgage up to date, and while doing that your home is protected from foreclosure.
- If your home is worth less than you owe on your first mortgage, you may be able to strip off the second mortgage and avoid making those payments.
- If your car is more than two and a half years old and the value is less than the debt, you should be able to get the loan reduced and also reduce the monthly payment.
- You are protected from wage garnishment by the IRS while you pay off any back income taxes that cannot be discharged.
- You are protected from enforcement powers while you catch up on your child support and alimony payments.
Chapter 12 Bankruptcy
There is a special form of bankruptcy for Texas farmers and ranchers. This is called Chapter 12. Chapter 12 is even more generous than Chapters 13 and 7, but there are certain qualifying clauses that decide if you can use this form of bankruptcy. When filing Chapter 12 the individual has 90 days to set up a repayment plan, and a further 30 days to commence payments. There are also several other benefits that you should discuss with an attorney if you think you may qualify. Chapter 12 is by far the most generous bankruptcy option in Texas.