The line of creditors on the phone, in your inbox, and even at your door, can be overwhelming. Bankruptcy can put an end to the collections calls and give you peace of mind. However, figuring out how to file for bankruptcy in Texas brings stress of its own. This should help.
The easiest way to understand how you file for bankruptcy is to break it down into steps. Some of these steps may overlap, and some of them are scheduled by the court or happen automatically. However, when they are all finished your bankruptcy will be too, and you’ll be able to move forward free of all dischargeable debt.
It is important to work with a bankruptcy attorney you can trust as you learn how to file for bankruptcy. You can file a bankruptcy petition without a lawyer. However, your chances of getting your debts successfully discharged go up substantially if you work with someone who knows the process and what the bankruptcy trustees will expect from you.
To take advantage of the federal bankruptcy courts, you will need to be up to date on filing your tax returns. Even if you can’t afford to pay the tax bill all at once, make sure you have filed your taxes before you start your bankruptcy.
Bankruptcy involves a lot of paperwork. Be sure you have documentation for each income source, your monthly expenses, every debt you owe, and all major financial transactions over the past two years. You should also make a list of all the real and personal property you own. Your attorney can help you estimate their value.
Every person who files for bankruptcy must complete credit counseling within 6 months before filing the bankruptcy petition. Your attorney can help you find an accredited counselor.
A Chapter 7 bankruptcy and a Chapter 13 payment plan operate differently and are appropriate for people in different situations. Choosing between these two processes is controlled by the “means test.” If your monthly income is too high you won’t be able to use Chapter 7, too low and you won’t be eligible for a Chapter 13. Be sure to discuss all your income sources and monthly expenses with your bankruptcy attorney so you won’t have problems meeting the means test income requirements later on.
The state and federal bankruptcy laws each include a list of exempt property that can't be sold or given to your creditors. These are the things you get to keep after the bankruptcy is over, including a home (up to a certain equitable value), one vehicle, retirement assets, and certain personal property. In Texas, you can choose whether to use the Texas bankruptcy exemptions or the federal exemptions. Discuss the differences with your attorney to make sure your most important property is covered.
After all these steps, you will finally be ready to file for bankruptcy. Your attorney will help you complete the two-page bankruptcy petition, along with all the lists (called Schedules) that disclose your assets, debts, monthly expenses, and recent transactions. In a Chapter 13 case, you will also submit a proposed payment plan that describes how you will pay down your debts over the next 3 to 5 years. You will be required to pay a filing fee when the petition is filed.
As soon as the bankruptcy petition is filed, the Bankruptcy Court will issue notices to every creditor you listed in your schedules. This triggers the automatic stay on all collections efforts. That means once your petition is filed creditors are required to go through the bankruptcy trustee instead of contacting you, to collect on your debt.
About one month after your petition is filed you will need to attend a hearing called the meeting of creditors or a 341 meeting. Despite the name, creditors rarely attend. Instead, you will speak with the trustee, turn over any non-exempt assets (in a Chapter 7 case), and answer any questions the trustee has about your schedules or payment plan.
After the petition is filed you also need to go through an additional financial management class. This is designed to help you budget your money better and avoid needing another bankruptcy in the future. You can do this any time after the bankruptcy is filed, but it must be completed before your debts will be discharged.
If you filed a Chapter 13 bankruptcy, you now need to do what you promised you would in your proposed payment plan. You will need to attend an additional hearing where the trustee will confirm or deny your repayment plan. For the next 3 to 5 years, you will need to pay the bankruptcy trustee the promised money, which he or she will distribute to your creditors. The remaining balances won’t be discharged unless you successfully complete the plan or your attorney requests a hardship modification.
When the schedules are accepted, the classes completed, and the payment plan is satisfied, your bankruptcy is over and your remaining eligible debts will be discharged. In a Chapter 7 this will happen within a few months after you file for bankruptcy. In a Chapter 13 it happens at the end of the payment plan.
Completing a successful bankruptcy means working with a skilled attorney who knows how to file for bankruptcy and completing all the steps. I’m Attorney Patrick T. Williams and I have been guiding Houston-area debtors through the steps of bankruptcy for over 20 years. Please call me or fill out an online consultation form to get started.