[wptabtitle]What are the main purposes of bankruptcy for individuals who cannot pay their debts?[/wptabtitle]
[wptabcontent]For individuals who cannot pay their debts, bankruptcy has two main purposes. First, bankruptcy operates to give the debtors a fresh start “by canceling” many of their debts, through an order of the court. Second, bankruptcy operates to give the people who are owed money – the creditor – a fair share of the money that the debtors can afford to pay back.[/wptabcontent][wptabtitle]What is a Chapter 7 and how does it work?[/wptabtitle]
[wptabcontent]In a Chapter 7 bankruptcy, debtors give up nonexempt property (often called luxury items) they own at the time they file the bankruptcy case. A trustee sells this property and uses the proceeds to pay creditors. The debtors receive their discharge shortly after the case is filed. The discharge relieves the debtor from the obligation of paying certain debts. In this way, Chapter 7 debtors are allowed to keep the money that they earn after filing the bankruptcy case, as well as most other property that they obtain after the filing.[/wptabcontent]
[wptabtitle]Who can file for bankruptcy?[/wptabtitle]
[wptabcontent]Any person who resides in, does business in, or has property in this country can file a chapter 7 bankruptcy.[/wptabcontent]
[wptabtitle]How much does it cost to file a chapter 7 bankruptcy?[/wptabtitle]
[wptabcontent]Your cost is divided into two categories. One, the filing fee is $299.00 and must be paid through your attorney to the bankruptcy court. Two, attorney fees vary with the complexity of your case.[/wptabcontent]
[wptabtitle]How often can I file bankruptcy?[/wptabtitle]
[wptabcontent]The discharge in a chapter 7 case only covers the debts that were incurred before the case was filed. The bills that a debtor incurs after the case is filed are not discharged. The hope is that after their old debts are canceled by the discharge, debtors will be able to pay their new obligations as they come due. But unexpected circumstances, such as illness or loss of employment, may again put debtors in a situation where they cannot pay their bills. In this situation, a debtor could file another Chapter 7 case, but there might not be a right to discharge. After a debtor receives a discharge in a Chapter 7 case, the debtor only has the right to receive a discharge in a later Chapter 7 case if the later case is filed at least eight years after the first case was filed. However, even during the eight-year waiting period, debtors may still be able to obtain relief in a Chapter 13.[/wptabcontent]
[wptabtitle]Where will my bankruptcy be filed?[/wptabtitle]
[wptabcontent]In the United States District Court in the district where you reside or where you work. The Bankruptcy Court is a part of the United States District Court. This Law Office limits its practice to the Fort Worth Division of the Northern District of Texas.[/wptabcontent]
[wptabtitle]Can husband and wife file a joint bankruptcy petition?[/wptabtitle]
[wptabcontent]Yes. The bankruptcy laws provide that a husband and wife may file a joint bankruptcy petition, using the same set of forms. Only one filing fee is charged for the joint petition.[/wptabcontent]
[wptabtitle]Are all debts incurred prior to filing bankruptcy discharged in Chapter 7?[/wptabtitle]
[wptabcontent]No. There are a number of types of debts that are excepted from the discharge given in Chapter 7. Among the most common debts are certain taxes, fraudulently incurred credit card debt, domestic support obligations (including child support and alimony), and federally insured student loans. A debtor with debts of this kind can still receive a discharge of other debts but, after the bankruptcy, the “excepted” debts will still be owing (less any payments made through the bankruptcy itself). Additionally, Chapter 7 debtors who engage in certain misconduct connected with the bankruptcy (like failing to disclose assets) may be denied a discharge entirely. However, many of the debts that are excepted from discharge in Chapter 7 may be discharged through a Chapter 13. Other types of debts (family support and student loans, for example) are excepted from discharge in Chapter 13 as well as Chapter 7.[/wptabcontent]
[wptabtitle]Do I have to go to court?[/wptabtitle]
[wptabcontent]You may have to appear on two occasions. The first occurrence will be approximately one month after your petition is filed. This meeting is called the “Meeting of Creditors” or the “Section 341 Meeting”. You will be put under oath and questioned about the events that led to your filing bankruptcy, about your assets and your liabilities. You may have to attend the second hearing, which is called the Reaffirmation hearing. This hearing is the formal hearing where the Judge decides whether or not to allow you to reaffirm a debt. If there is an objection to your discharge or the discharageability of a debt a separate hearing is necessary and you will have to attend.[/wptabcontent]
[wptabtitle]Who is the bankruptcy trustee?[/wptabtitle]
[wptabcontent]The trustee is an officer of the court and is usually a practicing attorney who is appointed by the court to gather your nonexempt property, convert it to cash, and distribute the cash to your creditors.[/wptabcontent]
[wptabtitle]What are my responsibilities to the trustee?[/wptabtitle]
[wptabcontent]You are required to provide the Trustee with a copy of your last filed tax return at least 7 days prior to the Meeting of Creditors. You are required to cooperate with the trustee. If you refuse to cooperate, you may jeopardize your right to receive a discharge. You must complete a personal financial management course on or before 45 days after the Meeting of Creditors.[/wptabcontent]
[wptabtitle]Do all creditors have to be listed on bankruptcy schedules?[/wptabtitle]
[wptabcontent]Yes. All of the debts have to be scheduled, with the name and address of the creditor. This is so each creditor can receive notice of the bankruptcy, and get their fair share of any money that is paid to creditors. Sometimes debtors think they should omit a creditor because they want to continue to pay the debt. Omitting a creditor violates the law and is unnecessary, because a debtor can always choose to pay a debt voluntarily, even though the debt has been discharged. Creditors, however are prohibited from taking any action to collect a discharged debt.[/wptabcontent]
[wptabtitle]What should a debtor do if a creditor does demand payment of a debt that is listed in the bankruptcy?[/wptabtitle]
[wptabcontent]If a creditor listed in the debtor’s schedule, attempts to collect a scheduled debt, the debtor should inform the creditor a bankruptcy case has been filed and which prohibits all collection efforts. If an attorney represents the debtor, the debtor should give the attorney’s name and telephone number to the creditor. If the debtor is not represented by an attorney, the debtor should give the creditor additional information about the case – the date of filing. The debtor should consult with an attorney to consider further action.
If creditors persist in contacting you once you have notified them that you have filed bankruptcy, you should keep a record of the time and content of the communication and discuss this with your attorney immediately. There may be substantial sanctions imposed upon the creditor for violation of law.[/wptabcontent]
[wptabtitle]Does a bankruptcy automatically remove liens, such as Mortgages against a debtor’s property?[/wptabtitle]
[wptabcontent]No. Liens can be placed on a debtor’s property in many different ways. Some are by agreements, like mortgages and auto liens. Others are by operation of law, like property tax liens on a debtor’s home. And some liens are to enforce judgments that have been entered against the debtor. Certain liens can never be removed in a bankruptcy case except by paying the underlying indebtedness. Other liens can only be removed if special action is taken in the bankruptcy case. So, if a debtor has any question about liens on his or her property, these matters should be discussed with an attorney.[/wptabcontent]
[wptabtitle]How do I know when my bankruptcy case is completed and I am no longer in bankruptcy?[/wptabtitle]
[wptabcontent]You are no longer in bankruptcy when you receive a discharge. Your case will remain open until the court enters an order closing the case, and a copy of this order is sent to the debtor. Unless the trustee has assets to distribute to creditors, Chapter 7 cases are closed fairly quickly.[/wptabcontent]
[wptabtitle]How does bankruptcy affect my credit rating?[/wptabtitle]
[wptabcontent]Issuers of credit are free to consider the fact of a bankruptcy filing in deciding whether to extend credit. Bankruptcy filing can be listed in credit reports for up to 10 years from the date of filing. Some issuers of credit may decide to extend credit regardless of a bankruptcy. Others may be willing to extend credit only after a number of years have passed, or until the bankruptcy filing is no longer reported on the credit report.[/wptabcontent]
[wptabtitle]What happens if my case contains non-exempt assets?[/wptabtitle]
[wptabcontent]The trustee will immediately begin to collect all of your non-exempt assets. Your creditors may file claims any time within 90 days after your Meeting of Creditors. The trustee will examine these claims and object to those he/she believes improper. All claims not objected to will be approved by the court.[/wptabcontent]
[wptabtitle]What are exempt assets?[/wptabtitle]
[wptabcontent]Exemptions are determined by the place where you have been domiciled for the 730 days immediately preceding the date of the filing of the petition or if the debtor’s domicile has not been located in a single State for such 730 day period, the place where the debtor’s domicile has been located for the 180 days immediately preceding the 730 day period or for the longer portion of such 180 day period. If you have not lived in Texas for the last two years you need to make your attorney immediately aware of this fact. Both the Federal Government and the State of Texas have defined exempt assets. After examining your situation, an election will be made between the two options. Generally the options are:
- Homestead, subject to purchase money, improvements, tax lien and consisting of a) Not more than ten urban acres: or b) Not more than 100 rural acres (200 acres for a family). c) Not more than $125,000.00 in equity that was acquired within 1215 days prior to the filing of bankruptcy.
- Personal Property: a) Without limit 1) All current wages 2) IRA’s and most retirement plans. 3) Prescribed health aids b) The following not to exceed $30,000.00 ($60,000.00 for a family) 1) Unpaid commission of $7,500.00 for a single person/$15,000.00 for a family. 2) Home furnishings. 3) Provisions for consumption. 4) Tools of the trade including boats and motor vehicles. 5) Clothing. 6) Jewelry up to $7,500.00 ($15,000.00 for a family). 7) Two firearms. 8) Athletic and Sporting equipment (including bicycles). 9) Motor vehicles, one for each licensed driver and person who must rely on a licensed driver for transportation. 10) Certain livestock. 11) Household pets. 12) Present value of any Life Insurance Policy.
- Unlimited insurance benefits and cash value
- Proceeds to be paid under compensation laws including unemployment, workers compensation and crime victim benefit.
- Texas Tomorrow Fund
Note: Personal property may not be converted from non-exempt to exempt in an effort to defraud creditors. Federal Exemptions (per debtor)
- $21,625 in value for real or personal property used as a residence
- Up to $3,450 in equity in any one motor vehicle
- Up to $550 in value in any particular item of household furnishings, or wearing apparel, up to a total of $11,525
- Up to $1,450 in jewelry held for personal use
- Up to $2,175 in tools of the trade
- Any unmatured life insurance contract you own, except for a credit life insurance contract
- The right to received certain support and disability payments
- Any property not otherwise protected in an amount not to exceed $1,150 plus any unused amount of the $11,975 (1) above
[wptabtitle]How will the court contact me about orders that I am to follow?[/wptabtitle]
[wptabcontent]The order will be mailed to you. It is very important that you insure the court has your correct address. It is your responsibility to see that the court has your correct address.[/wptabcontent]
[wptabtitle]What should I do if I move or change addresses?[/wptabtitle]
[wptabcontent]You must notify the court and your attorney in writing of your change in address.[/wptabcontent]
[wptabtitle]Do I lose any of my rights, such as the right to vote by filling bankruptcy?[/wptabtitle]
[wptabcontent]No. Bankruptcy is a civil, not a criminal proceeding. You do not forfeit any of your civil rights by filing. Also, neither a utility nor a governmental unit may discriminate against you because you have filed for bankruptcy relief.[/wptabcontent]
[wptabtitle]Will news of my bankruptcy be published?[/wptabtitle]
[wptabcontent]When your bankruptcy papers are filed, they become public records. Credit reporting agencies will generally report the filing. Our local newspapers or other media generally do not publish or report consumer bankruptcies unless the debtor is a well known or public person.[/wptabcontent]
[wptabtitle]Are my out-of-state debts discharged in the bankruptcy?[/wptabtitle]
[wptabcontent]Yes. The Supremacy Clause of the United States Constitution empowers federal law, therefore bankruptcy laws, with precedence over state laws. Bankruptcy is a federal proceeding. The Bankruptcy Court has the jurisdiction and power to discharge debts contracted anywhere in the country.[/wptabcontent]
[wptabtitle]Will I lose all of my property if I file bankruptcy?[/wptabtitle]
[wptabcontent]You will only have to turn your non-exempt property over to the trustee in a Chapter 7 bankruptcy. Under Texas law and under the Federal law, certain property is safe from general unsecured creditors and the bankruptcy trustee. Property you may keep is called exempted property.[/wptabcontent]
[wptabtitle]What, if any, debts should I pay prior to filing a Chapter 7 bankruptcy?[/wptabtitle]
[wptabcontent]Always pay your necessities first. Usually this means food and essential medical expenses. Next pay your housing-related bills. Keep up your mortgage or rent payments if at all possible. If you own your home, real estate taxes and insurance must also be paid unless they are included in the monthly mortgage payment. Similarly, any condo fees or mobile home lot payments should be considered a high priority. Failure to pay these debts can lead to the loss of your home. Pay what you must to keep essential utility service. While this may not always require full payment, whatever payments are necessary should be made if at all possible. Working hard to keep your house or apartment makes little sense if it is not livable because you have no utilities.
Pay car loans or leases next if you really need your car. You will usually make your car loan or lease payments next after food, housing costs, medical expenses, utilities and clothing. You may even want to pay for the car first if the car is essential to holding onto your job. If you do keep the car, stay current on your insurance payments too. Otherwise the creditor may buy at your expense, even more costly insurance that gives you much less protection. In Texas it is illegal not to have automobile liability coverage. If you can do without your car or one of your cars, you not only save on car payments, but also on gasoline, repairs, insurance and the like. You must pay your child support debts.
Income tax debts are a high priority. You must pay your current year’s income taxes that are not automatically deducted from your wages. You must also file your tax returns timely, even if you cannot afford to pay any balance due. If you are unable to pay required income tax obligations, you may consider filing a chapter 13 bankruptcy. In a chapter 13, interest and penalty cannot accrue during the repayment time. Loans without collateral are a very low priority. Most credit card debts, attorney, doctor and hospital bills, and other debts to professionals, open accounts with merchants, and similar debts are a low priority. Loans with only household goods as collateral are a very low priority. Sometimes a creditor requires you to put up some of your household goods up as collateral on a loan. You should generally treat this loan the same as an unsecured debt, that is, as a low priority. Creditors rarely seize household goods because they have little market value, it is hard to seize them without court process, and it is time consuming and expensive to use a court process to seize them. Do not move a debt up in priority because the Creditor threatens to sue. Many threats to sue are not carried out. Even if the creditor does sue, it will take a while for the collector to be able to reach your property, and much of your property may be exempt from seizure. Additionally, many debt collectors violate federal law in the manner by which they attempt to collect this obligation. If a violation occurs, you may be entitled to receive damages from the debt collector. If you believe a violation has occurred, talk to one of our attorneys about possible alternatives. Do not pay when you gave good legal defenses to repayment. Some examples of legal defenses are that goods purchased were defective, or that the creditor is asking for more money than it is entitled to. If you have a legal defense, you should obtain legal advice to determine whether your defense will succeed. In evaluating these options, remember that it is especially dangerous to withhold mortgage or rent payments without legal advice.
Court Judgments against you move up in priority, but often less than you think. After a collector obtains a court judgment, that debt often should move up in priority, because the
creditor can enforce that judgment by asking the court to seize certain of your property, wages, and back accounts. Nevertheless, how serious a threat this really is will depend, according to Texas law, on the value of your property and your income. It may be that all your property and wages are protected under state law, and you should pay this debt only after more pressing obligations. Student loans are a medium priority debt. Student loans should generally be paid ahead of low priority debts, but after top priority debts. Most delinquent student loans are backed by the United States and federal law provides special collection remedies against you, which other creditors do not, such as seizure of your tax refund and denying you new student loans and grants.
Debt collection efforts should never move up a debts priority. Be polite to the collector, but make your own choices about which debts to pay based on what is best for your family. Debt collectors are unlikely to give you good advice. Debtor collectors may be most aggressive to get you to pay debts that you should actually pay last. You can stop debt collection contacts and have legal remedies to deal with collection harassment. Threats to ruin your credit record should never move up a debt’s priority. In many cases, when a collector threatens to report your delinquency to a bureau, the creditor has already provided the credit bureau with the exact status of the account. And if the creditor has not done so, a collector hired by the creditor is very unlikely to do so. In fact, your mortgage lender, your car creditor, and other big creditors are much more likely to report your delinquency (without any threats) than is a debt collector that threatens you about your credit. Refinancing is rarely the answer.
You should always be careful about refinancing. It can be very expensive and it can give creditors more opportunities to seize your important assets. A short-term fix can lead to long-term problems.[/wptabcontent]
[wptabtitle]Does the automatic stay apply to Chapter 7?[/wptabtitle]
[wptabcontent]The automatic stay will apply to Chapter 7 cases if you have not had a prior bankruptcy case pending within the last year prior to filing. If you have had one case pending within the last year then the automatic stay will only be in effect for thirty days. If you have had two or more cases pending within the last year then there will be no automatic stay. This provision is very important if you had a Chapter 13 case that was dismissed instead of converted.[/wptabcontent]