What Happens When You File for Bankruptcy in Texas?

Filing for bankruptcy is not an easy decision to make. It can be a stressful and overwhelming process, but it may be necessary for those who are struggling with debt. Bankruptcy laws and procedures vary from state to state, so it’s important to understand the process in your state. This article will provide an overview of what happens when you file for bankruptcy in Texas, including the different types of bankruptcy, how to file, and what to expect during and after the process.

Types of Bankruptcy

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is designed to eliminate most unsecured debts, such as credit card debt and medical bills. To qualify for Chapter 7 bankruptcy, you must pass a means test to determine if your income is below the state median. If you qualify, a court-appointed trustee will sell your non-exempt assets to pay off your debts. Most people who file for Chapter 7 bankruptcy do not have any non-exempt assets, so they do not lose any property.

Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows you to keep your property and pay off your debts over a three- to five-year period. To qualify for Chapter 13 bankruptcy, you must have a regular income and your secured debts must not exceed $1,257,850, and your unsecured debts must not exceed $419,275.

How to File for Bankruptcy in Texas

Filing for bankruptcy in Texas involves several steps:

1. Credit Counseling: Before you can file for bankruptcy, you must complete a credit counseling course from an approved agency.
2. Filing the Petition: You must file a bankruptcy petition with the Texas bankruptcy court. You will need to provide information about your income, debts, assets, and expenses.
3. Automatic Stay: Once your petition is filed, an automatic stay goes into effect, which stops most creditors from trying to collect on your debts.
4. Meeting of Creditors: You will be required to attend a meeting of creditors, where the trustee and your creditors can ask you questions about your finances.
5. Financial Management Course: Before your debts can be discharged, you must complete a financial management course from an approved agency.

What Happens When You File for Bankruptcy in Texas?

When you file for bankruptcy in Texas, there are several things that will happen:

1. Automatic Stay: As mentioned earlier, an automatic stay goes into effect when you file for bankruptcy. This means that most creditors cannot continue to try to collect on your debts.
2. Exemptions: You will be allowed to keep certain property that is exempt under Texas law. Exemptions include your home, car, clothing, and household goods.
3. Trustee: A court-appointed trustee will oversee your case and liquidate any non-exempt assets in a Chapter 7 bankruptcy or manage your payment plan in a Chapter 13 bankruptcy.
4. Discharge: If your debts are discharged, you will no longer be legally responsible for paying them. However, some debts, such as student loans and certain tax debts, cannot be discharged.

Filing for Bankruptcy in Texas? Contact DeMarco Mitchell, PLLC!