GENERAL INFORMATION
If you are unable to meet your creditors payment demands, you need to know just what they can do to collect from you and any protection available to you. Bankruptcy is a legal option to stop collection activities such as foreclosure, repossession, garnishment, threatening phone calls and the like. When you file a bankruptcy, your creditors must cease these activities because they are legally stayed from attempting to collect the debts in any way. This website was created in order to assist you in learning more about your rights as well as your creditors' options.
IF A FORECLOSURE IS PENDING YOU NEED TO SEEK LEGAL COUNSEL AS SOON AS POSSIBLE. IT MAY BE TOO LATE TO HELP YOU IF YOU WAIT UNTIL AFTER THE FORECLOSURE HAS ALREADY TAKEN PLACE.
What do I have to do to file bankruptcy?
Everyone who files bankruptcy must attend pre-bankruptcy debt counseling, the Meeting of Creditors and post-bankruptcy financial management counseling. There may be other hearings set during the course of the bankruptcy case and you will be notified by your attorney if you must attend.
The Means Test is a mathematical test that is performed on your finances using the figures provided by you and comparing it to the reasonable cost of living budget created by the Internal Revenue Service (IRS). The test shows how much you should be able to pay to your creditors through your bankruptcy. If the test reflects a negative number, then you are presumed to have no money to pay to your creditors and you qualify for Chapter 7. If the test results in a positive number, you qualify for Chapter 13 and will need to make payments to the Trustee during the bankruptcy case. Just because you qualify for one chapter or the other, does not mean you will file under that chapter. The test is only one tool in determining the best chapter for your situation.
Self-employed individuals may file bankruptcy and protect their assets. The budget, means test, creditor list and asset list must reflect which entries are personal and which are business, so it is important to be detailed in completing any forms.
There are debt limits that must be followed in filing for bankruptcy. The Bankruptcy Code requires that if you have more than $336,900 in unsecured debt or $1,010,650 in secured debt you do not qualify for a Chapter 13. The Court is very strict on this limit. If you have questions or possible contingent claim issues, be sure to discuss these with your attorney.
You must list all of your debts in the bankruptcy schedules. You are not allowed to pick and choose the debts you list; but you may be able to reaffirm the ones for the assets you want to try to keep. Your creditors have the right to oppose your bankruptcy, but the final decision is up to the Judge and will depend somewhat on your payment record during your bankruptcy case.
If you are currently married, but your spouse does not need bankruptcy relief, he or she is not required to file with you.
Can I be forced into bankruptcy?
In extremely rare cases, an Involuntary Petition for Relief may be filed against you by your creditors, forcing you into bankruptcy even if you did not want to file. The Court will determine if the filing is appropriate and the case permitted to continue.
Which bankruptcy chapter will my case be filed under?
Your finances, history and goals will determine which chapter of the Bankruptcy Code is right for you. Chapter 7 and Chapter 13 are designed with the individual in mind. Chapter 11 is designed for large businesses. Chapter 7 allows you to wipe out all your existing unsecured debt (with some exceptions) without making any further payments. Chapter 13 permits you to deal with your creditors by making monthly payments to a Trustee for a number of years, enabling the Trustee to pay a portion of your debts. You will be tested by the court system and you must qualify for the chapter you wish to use. If you have enough income or assets to be able to pay a significant portion of your debts, you will not qualify for Chapter 7, but will only be eligible to file a Chapter 13 case. A more complete discussion of the chapters can be found on this website under the chapter numbers.
Where will my case be filed?
Bankruptcy is a process created by Congress and administered by local Federal Courts. A bankruptcy case must be filed in the Federal district where you reside. Both Dallas and Ft. Worth have bankruptcy courts in the Northern District of Texas, so your case will be filed in one of those courts.
If I file for bankruptcy, will the court or creditors take all my property?
Every Debtor or family has the legal right to keep certain exempt assets after filing bankruptcy and the general creditors cannot take them. This will usually include your home, your car, household goods and furnishings, current earnings, retirement funds and other essentials. Only the secured creditors such as the mortgage company and your car creditor have any rights in any of these exempt assets. For most Texas Debtors, the exemption laws are broad enough to protect almost all assets. When you review your assets with your attorney, you will learn whether you own any non-exempt assets. Examples of assets you might not be able to exempt: real estate that is not the homestead; interest in a business that has value; or a motorhome or boat. Even these kinds of assets might be exempt in certain cases, so be sure to raise any questions you have when you meet with an attorney. If you do have assets which cannot be exempted, the bankruptcy Trustee has the legal right to sell those assets in order to pay your debts.
Will I be required to pay all my secured debts?
The general rule in bankruptcy is: If you want to keep an asset, you must pay for it. If you want to keep your home, you must make the mortgage payments which come due after the bankruptcy case is filed. If you are behind on your payments and still want to keep your home, you can file a Chapter 13 plan to get caught up on your payments over a period of years; but you may not fall farther behind after bankruptcy. If you want to keep your car, you must pay for it, but you can deal with the car debt in a Chapter 13 and avoid repossession.
You may have signed papers pledging your personal household goods to secure the claim of a creditor. If so, and the money you borrowed from the creditor was not used to purchase the household goods, the lien may be avoidable. This is an action that must be taken while the bankruptcy case is pending. If the debt is avoidable, the creditors lien will be removed from your household goods leaving it strictly an unsecured debt and most likely dischargeable.
Accounts with banks, credit unions and other financial institutions where you have money on deposit are in jeopardy if you owe money to that bank. If you have such an account you may be advised to close the bank account and move your funds to another institution.
Are there debts that will remain after bankruptcy?
Some debts do not get discharged after bankruptcy. These debts include 1) current taxes and most payroll taxes owed by an employer, 2) student loans, 3) secured debts if you keep the collateral, 4) court ordered support payments, and 5) other miscellaneous fraud and criminal conviction related debts. There may be exceptions so be sure to discuss these with your attorney. If you are divorced, the debt owed by you to your former spouse may not be dischargeable in your bankruptcy case if it is a court-ordered debt. Your former spouses credit may be affected by your bankruptcy.
Can my creditors oppose my bankruptcy case?
If a creditor objects to your bankruptcy filing, the creditor must file an Adversary Proceeding to prove that you should not be granted a discharge of your debts, or that you should not be granted a discharge of the debt to a particular creditor. The most common reason for such an objection is that the creditor believes you have defrauded someone or that you have used your credit cards after you knew you could not pay. If the creditor is successful, you may be either denied any relief by the bankruptcy or you may be denied relief as to that creditor only.
Will the bankruptcy Trustee try to take my tax refund?
Tax refunds will usually be your funds to keep if the amount is exempt. If you owe the IRS money from previous years, or if you owe a student loan, your refund may be seized by the Government to meet those obligations. If you are in Chapter 13, the Trustee may try to keep your tax refund to add to your plan payments. Your situation will determine the treatment of the refund. While you are in bankruptcy, the time period to receive your refund will be longer than normal. The average time from filing the return to receiving the refund is about 3 months while you are in an active bankruptcy case. You must file all tax returns on time while your case is open.
If I have filed bankruptcy before, will I be able to file a new case?
If you have filed bankruptcy before there are time limits on your ability to file another bankruptcy case. Please make sure you know the date you previously filed, what chapter, and the date of discharge or dismissal when you meet with the attorney. If you filed and were discharged in a Chapter 7 within 8 years, you may not file another Chapter 7 case, but you may file a Chapter 13; if it was more than 8 years you are eligible to file another Chapter 7. If you filed and were discharged in a Chapter 13 within 6 years, you are limited to filing another Chapter 13; if more than 6 years, you can file either a Chapter 7 or Chapter 13. If you have filed bankruptcy before, a special hearing regarding the automatic stay will be held within thirty days of your filing date. Your eligibility to refile will be approved or denied at that hearing.
Will filing bankruptcy hurt my credit or my employment?
A bankruptcy filing will remain on your credit record for ten years after the filing date. Obtaining new credit after a bankruptcy is at the new creditors discretion. Your post-bankruptcy credit score will be based on the payments you continue to make timely (house, car) and will vary for each person. You may not incur or refinance any debt during the bankruptcy without court permission. (See the Fair Credit Reporting Act for more information.) Landlords may refuse to rent to you; banks may refuse to open a new account for you.
Federal law prohibits employers from discriminating against you solely because you filed bankruptcy. Public employers cannot fire you, impede promotions or deny employment based on the filing. Although private employers may refuse to hire you based on the filing, they may not fire you.
During and after your bankruptcy case, the denial of a federally-backed student loan or grant based solely on the bankruptcy filing is illegal if you are seeking the loan or grant for yourself or your dependents. This is one form of credit or loan that you are allowed to obtain during your case without asking the courts permission.
