Lewisville Bankruptcy Lawyer

Experienced Consumer Bankruptcy Representation

At The Wright Firm, L.L.P., in Dallas, Texas, our attorneys provide comprehensive counsel to individuals who want to use the federal bankruptcy laws to get a fresh financial start. To set up a confidential consultation, contact our office by e-mail or call us at 1-877-353-4600.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is often referred to as "liquidation". This may sound confusing, but think of it this way: ever heard the term "cash flow"? Cash can flow from person to person easily, just like water flows down a river. In a Chapter 7 Bankruptcy, your bankruptcy trustee will turn certain types of your property into cash (or "liquidate"), and that cash will then flow to your creditors to pay off your debts. In many Chapter 7 cases, all of the debtor's property is exempt, so the trustee will have no assets to liquidate and distribute to creditors.

The bankruptcy begins when you (and your attorney) file for bankruptcy with the court. You are no longer in bankruptcy when you receive a discharge.

What is Chapter 13 Bankruptcy?

Chapter 13 is a proceeding under the federal bankruptcy laws where a person turns his debts, together with a plan for repaying them, over to the Bankruptcy Court. The debtor (you) will make regular installment payments to a person called the Chapter 13 Trustee. The Trustee collects the installment payments and pays required creditors in the manner prescribed in the Plan. While the Plan is in effect, the court puts into effect an Automatic Stay which prevents collection efforts from all creditors.

Chapter 13 bankruptcy often provides a solution for people who have faced short-term financial setbacks like job loss, illness, or large unexpected expenses. Chapter 13 combines the Automatic Stay, with the ability to catch up past due payments over a period of three to five years after filing bankruptcy while keeping current payments up to date. Many people looking to stop foreclosure or avoid repossession choose Chapter 13 for this reason.

What's the Difference Between Chapter 7 and Chapter 13?

In a Chapter 7 bankruptcy, you don't pay off your debts. Instead, you must turn over all non-exempt property to the Chapter 7 Trustee. The Trustee will sell all non-exempt assets, and creditors are paid from the proceeds of this sale.

In a Chapter 13 you may keep all of your property. You have the opportunity to take (usually) 3 to 5 years to get caught up on debts that have fallen behind, while still making all current debt payments.

How long it takes

Chapter 7 cases where there are no assets to distribute to creditors are closed fairly quickly, sometimes in as little as a few months. Even though you have received a discharge, however, you case with the Court will remain open until the judge enters an order closing the case. A copy of the order closing your case will be sent to you by the Court.

Chapter 13 repayment plans may take up to 5 years for you to complete.

The Chapter 7 Means Test

To qualify for Chapter 7 bankruptcy, you must first pass a "Means Test". The Means Test has two steps. The means test can get very complicated so we at The Wright Firm, L.L.P. recommend you seek the assistance of an experience bankruptcy attorney. An extremely simplified version of the test looks like this:

Step 1: Median Income
Your monthly income is compared to the median income for a Texas family the same size as yours. "Median" is another way of saying "middle," like the median in the middle of a highway. If you make the same or less money than the median income for a family your size, you qualify for Chapter 7 bankruptcy. If make more than the median income, you have to move on to Step 2 of the test.

Step 2: Calculating Disposable Income
If your disposable income over the next five years is:

• Less than $6,000 ($100/month) - You Pass
• Greater than $6,000 but less than $10,000 - You May Have Passed, (depending upon your allowed expenses)
• Greater than $10,000 - Sorry!

Should I file Chapter 7?

You may want to consider filing for Chapter 7 if you:

• Have no income or low income
• Have little or no money left after paying your necessary living expenses each month
• Rent or have little equity in your home
• Have few assets (or no assets) outside your furniture, clothing and other necessities.

Qualifying for Chapter 13

To qualify for Chapter 13 bankruptcy, a debtor must:

• Have a regular source of income;
• Have enough income left over after covering current necessary living expenses to make regular payments to the trustee; and
• Fall within pre-set limits for secured and unsecured debts. The limits are updated periodically, and a local bankruptcy attorney can tell you the exact current limits.

For those who do not qualify for Chapter 13 bankruptcy, you may want to consider filing in the form of Chapter 7 bankruptcy.

To set up an appointment, send us an e-mail or call us at 1-877-353-4600.

Requirement of Credit Counseling

Whether you are filing under Chapter 7 or 13, you must receive a Credit Counseling Briefing from a certified credit counseling agency – BEFORE YOU FILE. This counseling is REQUIRED by federal law (with very few exceptions), and your case may be DISMISSED if you do not attend a counseling briefing. Your bankruptcy attorney can recommend a counseling provider for you.

Bankruptcy Fraud

You must disclose ALL of your debts when I file for Chapter, or else you risk facing charges for bankruptcy fraud. This is a serious federal offense! Be very careful to disclose all of your debts to the Court.

Do not attempt to conceal your property, destroy any financial records, violate any court order or make any last minute high-dollar charges on your credit cards before you file. ALWAYS listen to the advice of your attorney!

Where will my Bankruptcy case be filed?

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.

Steps for Filing Chapter 7 Bankruptcy

1. Complete your credit counseling session
2. Provide all of the necessary information to your attorney
3. Your attorney will review your situation and prepare a bankruptcy petition.
4. Your attorney files the petition in local bankruptcy court
5. The Court will appoint a bankruptcy trustee to your case

The filing fee is $299.00 and must be paid through your attorney to the bankruptcy court. Attorney fees vary with the complexity of your case.

Steps for Filing Chapter 13 Bankruptcy

1. Complete your Credit Counseling Briefing
2. File your bankruptcy petition in the appropriate court
3. The court will enter an automatic stay, prohibiting creditors from taking any further collection action while the bankruptcy case is pending, or until further order of the bankruptcy court
4. The bankruptcy court will send notice to all of the creditors listed in the Chapter 13 petition, and will assign a bankruptcy trustee to the case.
5. Within about 15 days after the petition is filed, the court will send a Notice of Commencement of Case to the bankruptcy petitioner and to all of the creditors listed in the bankruptcy petition. This notice will include important information like the time, date and location of the creditors meeting and the deadlines for claims and/or objections from creditors
6. Schedules containing information about the petitioner's debts, assets, income and expenses MUST be filed within 15 days after the case is commenced. These schedules may be filed with the petition. If the petitioner is filing bankruptcy in order to stop foreclosure or repossession, the schedules may be filed separately so that the petition can be filed immediately, without waiting to collect the required information and documentation for the schedules.

Automatic Stay

The first thing that happens after you file for either Chapter 7 or 13 bankruptcy is the "automatic stay." The court or the bankruptcy trustee will mail notice to all the creditors you have listed to notify them that you have filed for bankruptcy. Once they are notified of your bankruptcy filing, your creditors may not call you anymore to collect the debt. If a creditor continues to call you – tell them they must speak to your attorney.

Be sure to tell your bankruptcy attorney if you have any on-going lawsuits or wage garnishments, so that he or she may call these creditors immediately. Filing bankruptcy automatically stays (stops) all lawsuits, garnishments, attachments and other attempts by your creditors to take your property. A few days after your case is filed, the Bankruptcy Court will mail a notice to all of your creditors ordering them to stop all action against you.

Chapter 13 Meeting of Creditors

The Meeting of Creditors will usually take place within 30 to 45 days after your petition is filed. The meeting is informal and your attorney will prepare you for this occasion. The "Meeting of Creditors" usually does not last longer than 15 to 20 minutes.

How Often You Can File

Please note: you may only file for Chapter 7 bankruptcy once in 8 years! If you have received a discharge in a Chapter 7 case previously, you only have the right to receive another Chapter 7 discharge if you new case is filed at least eight years after the first case was filed. However, even during the eight-year waiting period, you may still be able to obtain relief in a Chapter 13.

Chapter 7 Bankruptcy Exemptions

In a Chapter 7 proceeding, certain assets will be considered exempt – meaning that they will not be sold to pay off debts. Exemptions are determined by the state where you have been domiciled. "Domicile" in this sense means the state where you lived. The key time period is the 730 days (2 years) immediately before the date you file your petition. If you have lived in the same state for the last 2 years before filing, that will be your domicile for exemptions. If you have lived in more than one state in those 730 days (2 years):

• Look back 2 years before you filed
• Look back 6 months further
• What state did you live in the majority of those 6 months?
• That's your exemption state!

Both the Federal Government and the State of Texas have defined exempt assets, and you and your attorney will make a choice between the two.

Texas Exemptions:

• Homestead, subject to purchase money, improvements, tax lien and consisting of
  • Not more than ten urban acres; or
  • Not more than 100 rural acres (200 acres for a family).
  • Not more than $125,000.00 in equity that was acquired within 1215 days prior to the filing of bankruptcy
• Personal Property
  • Without limit
    1. All current wages
    2. IRA's and most retirement plans
    3. Prescribed health aids
  • 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 case 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)

• $18,450 in value for real or personal property used as a residence.
• Up to $2,950 in equity in any one motor vehicle.
• Up to $475 in value in any particular item of household furnishings, or wearing apparel, up to a total of $9,850
• Up to $1 ,225 in jewelry held for personal use
• Up to $1,850 in tools of the trade
• Any un-matured 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 $975 plus any unused amount of the $9,250 in (1) above

Secured Debts - Chapter 7

Chapter 7 bankruptcy helps eliminate unsecured debts, like credit cards. However there is another type of debt called a secured debt that Chapter 7 will not (necessarily) discharge. A secured debt is a debt that is backed or "secured" by collateral. For example, your house is probably the collateral for the mortgage on it, and your car is probably collateral for the loan on it. Secured debts are generally not separated from the assets that secure them. That means that if you want your car loan discharged, you'll have to give back the car.

However, if you want to keep your car (or another asset) you may be able to negotiate an agreement with your creditors to "reaffirm" the debt. By reaffirming a debt, you agree to continue making payments in exchange for the right to keep your property.

Secured Debts - Chapter 13

Under a Chapter 13 plan, your debts are satisfied by the installment payments to the Chapter 13 Trustee. At your option, you may choose to give back ("surrender") collateral to your secured creditors. If you surrender property through the Chapter 13, you will cancel the debt on that property equal to the value of the property you are giving back. For example, if you decide to give a car back to the finance company, and the car is worth $8,000, then you will get $8,000 of your debt to that finance company canceled.

The Chapter 13 Repayment Plan

A typical Chapter 13 bankruptcy repayment plan is 36 to 60 months (3 - 5 years) long. During that time, the bankruptcy petitioner keeps current payments current, but makes monthly payments toward past due balances. Debts are prioritized, which means they are put into order by who gets paid when. Secured creditors (like the mortgage company) get paid first. Any income leftover goes to pay unsecured creditors (like credit card companies). If all payments have been made as scheduled, unsecured debt remaining at the end of the plan may be discharged.

Getting Your Plan Approved

Only the Bankruptcy Court must approve your plan. The Bankruptcy Court will approve your plan if:

• It is proposed in Good Faith;
• The required fees are paid;
• Each of your secured creditors is paid the lesser of
  • What you owe or
  • The value of the collateral (with some exceptions), or
  • The collateral has been surrendered to satisfy the claim
• You make the required payments to the Chapter 13 Trustee timely

Buying on Credit During Chapter 13 Repayment

If your plan lasts for a number of years, it may become necessary to purchase a different car, a larger house, or some other item that is needed for the well being of you or your family. You must petition the court for permission before making the purchase. If the judge feels the purchase is reasonably necessary, he will allow you to make the purchase on credit. This is especially true if the new debt doesn't impair your ability to make the installment payments in your plan.

Debtor Education

Before you can get a discharge either in Chapter 7 or Chapter 13 bankruptcy, you must complete a Debtor Education Course. A Debtor Education Course is a personal financial management course required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. So, you are receiving Counseling going into bankruptcy and debtor education coming out of it.

Taking a Debtor Education course after filing bankruptcy is a bit like taking Defensive Driving after getting a speeding ticket. The purpose is to teach you how to avoid making the mistakes that got you in trouble, and how to do things better the next time around.

Talk to an Attorney

Any kind of bankruptcy is complicated and paperwork intensive. A mistake in your Chapter 13 or Chapter 7 filing may result in your payment plan not getting approved, cause delays in the process, cost you your automatic stay, or even cause your case to be dismissed.

A local bankruptcy attorney can explain your options and guide you through the process, helping to ensure that all filing requirements and deadlines are met and that you've accounted for all of your allowable expenses and proposed a plan that will allow you to make payments while keeping up your regular expenses. We at The Wright Firm, L.L.P. highly recommend you contact a local bankruptcy attorney to evaluate your options.

How will a Bankruptcy case affect my Credit Rating?

Generally speaking, if you are filing for bankruptcy, you have probably already done damage to your credit rating. The effect a bankruptcy will have on your credit will depend on your present history and your situation. A Chapter 13 may stay on your credit history for a period of 7 years from the date of filing. A Chapter 7 may stay on your credit history for 10 years from the date you filed.

Can a Married Couple File Bankruptcy jointly?

Yes, they CAN. Unless one of the spouses is a stockbroker or a commodity broker, a husband and wife can file a joint petition if both reside in, do business in, or own property in the United States. Whether they SHOULD is a difficult question that should be discussed with your attorney.

Will I lose my house?

Filing a Chapter 7 will stop a foreclosure or eviction temporarily, but a creditor can usually get the court's permission to proceed fairly quickly. Filing a Chapter 13 will stop foreclosure and allow a mortgage arrearage to be cured through the Chapter 13 repayment plan. Keeping your home is one of the most critical procedures you will face in bankruptcy, and if you are a homeowner you should see an attorney, especially if you are in foreclosure.

Child Support

You must remain current on your post-petition child support obligation. One condition of a discharge in Chapter 13 is that you MUST have paid all post-petition child support prior to the discharge. You also cannot get child support obligations discharged in a Chapter 7 bankruptcy.

The obligation to support your children is considered so important that the law will not let you out of it by filing bankruptcy.

Student Loan Debt

Student loans are not dischargeable in a Chapter 7 bankruptcy case except under certain very narrow circumstances, but student loan debt may be included in a Chapter 13 repayment plan.

Tax Debt

The following income taxes are priority claims and are not dischargeable:

• Taxes where the returns were due within three years of the bankruptcy, and
• Income taxes that were assessed within 240 days (about 8 months) before the bankruptcy.

If you file Chapter 13, your plan must provide for payment in full of these taxes. Penalties assessed on the taxes are not priority claims however, and can be reduced substantially. Once you have filed, the tax debt does not continue to accrue interest.

Contact The Wright Firm, L.L.P.

To set up a confidential consultation with an experienced personal bankruptcy lawyer, call us at 1-877-353-4600 to set up an appointment contact us through our online intake form..

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