Chapter 7 Bankruptcy In Texas
Chapter 7 is known as a liquidation bankruptcy and is typically what most people have in mind when filing for bankruptcy, but it is the far more difficult chapter of bankruptcy to qualify for. With Chapter 7, a person will have to submit to a bankruptcy means test, which is used to determine if a bankruptcy filing is considered abusive of the bankruptcy process.
Chapter 7 often means that debtors are at risk of losing some major assets that the bankruptcy trustee will have to sell to pay creditors, and a person who files Chapter 7 will not be able to file for bankruptcy again for another eight years. The benefit of successfully filing Chapter 7, however, is that debts are completely discharged and the person will no longer be liable for them.
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Houston Chapter 7 Bankruptcy Attorney
Are you wondering if you might be able to file for Chapter 7 bankruptcy in Houston? You will want to be sure you contact The Sparrow Law Firm, PLLC, for help with the means test and all other requirements involved in filing for Chapter 7, as our firm has the experience needed to help you get the most favorable results for your case.
Do not try to file for Chapter 7 on your own, as you will likely encounter a series of immense challenges that will only cause even more problems for yourself. You should instead call 281-973-0431 or contact our firm online today to receive a free consultation that will allow us to examine every aspect of your case and whether you can qualify for Chapter 7.
Chapter 7 Eligibility
A bankruptcy court can dismiss a Chapter 7 bankruptcy case when an individual’s debts are primarily consumer rather than business-related. Such filings are considered abusive of the bankruptcy process, and the bankruptcy means test also determines whether a Chapter 7 filing is considered abusive.
Abuse will be presumed when a debtor’s aggregate current monthly income over five years is more than $12,850 or 25 percent of the debtor’s nonpriority unsecured debt when that amount is at least $7,700. Debtors may rebut presumptions of abuse, but failure to do so will often mean that their cases are converted to Chapter 13 or their cases will be dismissed.
There is no limit to the amount of debt that a person may have when filing Chapter 7, but there are circumstances that may prohibit a Chapter 7 filing. For example, a person cannot file for Chapter 7 if they had a prior bankruptcy petition dismissed because of their willful failure to appear before the court or comply with orders of the court 180 days prior to the petition. A debtor who voluntarily dismissed a previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens will also be prohibited from filing.
Chapter 7 also will not be approved without the debtor receiving credit counseling within 180 days of their filing. Furthermore, Chapter 7 will require the completion of the bankruptcy means test, which typically examines all sources of a person’s income during the previous six months, when a person’s income is more than the state median.
When monthly income and annual income are determined, they will have to be less than the state median for a person to successfully file for Chapter 7. As of 2020 in Texas, the median income standards are as follows:
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As a liquidation bankruptcy, a debtor in Chapter 7 does not deal with any repayment of debts. The trustee assigned to the case, however, will collect and sell all of the debtor’s nonexempt assets to repay creditors in accordance with the Bankruptcy Code.
The main purpose of Chapter 7 bankruptcy is to give debtors a “fresh start,” and debtors will be free from any liability for their discharged debts. It is important to keep in mind that Chapter 7 cannot discharge all debts, as some debts may not be discharged in any bankruptcy proceeding.
Chapter 7 Process
A person begins the Chapter 7 bankruptcy process by filing a petition in the bankruptcy court for the area in which they live. Debtors will also have to file schedules of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, and a schedule of executory contracts and unexpired leases.
Debtors are also required to provide the bankruptcy trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case. This will include tax returns for prior years that had not been filed when the case began.
There are additional document filing requirements for debtors with primarily consumer debts. These include a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling as well as evidence of any payment from employers received 60 days before filing, a statement of monthly net income and any anticipated increase in income or expenses after filing, and a record of any interest the debtor has in federal or state qualified education or tuition accounts.
Chapter 7 cases also involve filing fees, administrative fees, and trustee surcharges. These may be paid in installments, but the court may also waive the fees when a debtor has an income that is less than 150 percent of the poverty level.
Information that will be required of a debtor filing for Chapter 7 will include a list of all creditors as well as the amount and nature of their claims, the source, amount, and frequency of the debtor’s income, a list of all of the debtor’s property, and a detailed list of the debtor’s monthly living expenses. Debtors will also need to file a schedule of their exempt property, and Texas is considered a very debtor-friendly state with the number of exemptions that it offers most debtors.
Filing a Chapter 7 bankruptcy petition will trigger an automatic stay that immediately halts all creditor collection efforts. Within 21 to 40 days, the bankruptcy trustee will usually schedule a meeting of the creditors, which the debtor must attend.
At the meeting of the creditors, the debtor is placed under oath and must answer questions from both the trustee and the creditors. The meeting of the creditors is also used by the trustee to relay information about the effect of bankruptcy on their credit history and their ability to file under a different chapter.
Following the meeting of the creditors, it will typically take 60 days for a person to have their Chapter 7 case discharged. All told, it usually takes less than six months to file for Chapter 7 bankruptcy.
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Chapters Of Bankruptcy
The two most common bankruptcy chapters for individuals are generally Chapter 7 and Chapter 13. Chapter 7 is also known as a straight bankruptcy, as all debts are discharged. Chapter 13 involves a debtor entering a repayment plan in which they repay all or a portion of their debts.
Chapter 7 is considered a liquidation case, and a debtor will need to pass the bankruptcy means test. The means test takes into account all of a debtor’s income, expenses, and other debts to determine whether they are able to pay back some of their debts. Many Chapter 7 cases are considered “no-asset cases” because the debtors have little to no nonexempt property subject to liquidation.
When a person cannot pass the means test to file for Chapter 7, they can still be able to file for Chapter 13. With Chapter 13, a debtor will propose a repayment plan that typically lasts between three to five years to repay some or all of their debts.
The difference between Chapter 7 and Chapter 13 can be very important to people who are seeking to maintain ownership of major possessions such as homes. A debtor may be able to strip a second mortgage in Chapter 13 when they would otherwise lose a home in Chapter 7.
Chapter 13 can be especially useful when there is a foreclosure sale scheduled for your home. It is also a common chapter for people dealing with Internal Revenue Service (IRS) issues, people struggling with vehicle loans, or people who are recently divorced and are deemed to have enough money to file for Chapter 13.
Other chapters of bankruptcy include Chapter 9, which exclusively provides for reorganization of municipalities. Chapter 11 is also a reorganization bankruptcy, and is usually limited to businesses or individuals with significant assets or income. Chapter 12 is a debt restructuring bankruptcy reserved for family farmers and family fishermen. Chapter 15 allows foreign individuals or companies to file for bankruptcy in the United States when there are assets in more than one country.
Texas Chapter 7 Bankruptcy Resources
Chapter 7 – Bankruptcy Basics | United States Courts – Visit this United States Courts website page to learn more about Chapter 7 bankruptcy, including alternatives to Chapter 7 and background information on the history of Chapter 7. You can also find information about Chapter 7 eligibility, how Chapter 7 works, and the role of the case trustee. There is also information about the Chapter 7 discharge and you can find Chapter 7 fee waiver procedures and resources, which outline specific applicable sections of the United States Code.
Chapter 7 Bankruptcy – Fact sheet | TexasLawHelp.org – Use this website to get answers to questions about Chapter 7 and the means test. There is also information about how Chapter 7 will affect your credit and a helpful guide to all of the different things that Chapter 7 can and cannot do for you. Finally, there is also information about alternatives to Chapter 7.
Contact A Chapter 7 Bankruptcy Lawyer In Houston
If you have been thinking about possibly filing for Chapter 7 bankruptcy to deal with your financial woes, you are going to want to make sure that you have a legal expert on your side so you can have the most favorable chance of getting the discharge you so richly deserve. The Sparrow Law Firm, PLLC, helps clients all over the Houston area get their bankruptcy petitions approved in a timely and effective manner, and we can help you get through the Chapter 7 process without any unnecessary stress for yourself.
Do not wait another moment to call 281-973-0431 or contact us online so you can take advantage of a free consultation that will let us review all of the facts of your case to determine if you are eligible for Chapter 7. We will work tirelessly to help you get the debt relief you need, and we have the experience needed to ensure that you are able to get real results that will allow you to finally find financial freedom and take the next steps in your life.