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Is Chapter 7 Bankruptcy
the Right Answer for You?
Chapter 7 bankruptcy offers a fresh start for many people who feel buried in credit card debt, medical bills, and other unsecured debt.
In most Chapter 7 cases, an automatic stay takes effect as soon as the case is filed. That stay freezes collection action immediately: repossession, foreclosure, wage garnishment, lawsuits, even threatening letters and telephone calls.
When a discharge order is entered in a Chapter 7 case – often just four to five months after filing – most unsecured debt is eliminated. That means creditors and collection agencies are violating a court order if they ever try to collect that money again.
What would waking up debt free do for you? Are you ready to find out?
The Chapter 13 Bankruptcy
Of course, Chapter 7 isn’t a one-size-fits-all solution. For people with high income, high-value assets that may not be exempt in bankruptcy, or a lot of secured debt, Chapter 13 often provides relief.
The core of a Chapter 13 case is a three to five year repayment plan that allows time to catch up on past due balances without the constant pressure of collection actions, mounting late fees and the ongoing threat of repossession or foreclosure.
Some remaining unsecured debt may even be eliminated when the plan is successfully completed.
Take the first step right now and breathe easier tonight.
How to File Bankruptcy in
Filing for bankruptcy in Texas is a serious decision, but the process although lengthy is surprisingly simple. We have created the following step by step process for you, so you can quickly understand everything it entails and then follow the process to new debt and stress-free life. Always remember we are here to help you in any way we possibly can, never be afraid to reach out for help, and although things may appear scary at present this process is the start of the rest of your life.
Collect Your Documents
This is probably the easiest part of the entire process, so get this out of the way, and you are off to a great start. You need to get all of your documentation together before anything else can happen. Our advice would be to store it all in one folder, where you can access it quickly and easily. You will need the following pieces of documentation
- Six months of payslips or alternative proof of income. If you are currently unemployed but have other forms of income, then you should ensure that you have this information to complete your documents. Without this documentation, the process cannot move forward, and the responsibility for providing the information lies with you.
- A List Of Your Creditors - You will need a comprehensive list of your creditors, including the amount you owe each company, and their registered business address. Although this might sound like a challenging task, it is actually straightforward. Pull a copy of your credit report, and this should provide all the information needed.
- Asset Information- Gather together all documentation that provides information on your assets. You may well have more than you think. Documents could include bank account details, whole life insurance policies, IRA's, 401k's, retirement policies, any Kelley blue book valuations on any vehicles that you own. You will also need valuations or appraisals of any real estate you own.
- Last two years of Filed Tax Returns - You will also need the last two years of your filed tax returns for a Chapter 7 bankruptcy, and potentially the previous four years for a Chapter 13 Bankruptcy.
- Recent Bank Account Statements - These will provide further evidence of your financial situation
Take Credit Counseling
One of the main aims of the bankruptcy process is education. The government wants to do everything possible to ensure that people going through bankruptcy wherever possible only go through the process once. Everyone who files for bankruptcy in Texas is required to complete a credit counseling course prior to filing. The course takes approximately 1.5 hours, and can even be completed over the phone or on the internet. The course must be taught by an approved credit counseling agency and has to be completed within six months of filing. Once you complete the course, you will be issued with a certificate which you will need as part of the filing process. It is essential that you do not take the course, until you are ready to file, because if your certificate expires before you file, then you will have to retake the class.
Complete the Bankruptcy Forms
This is the most challenging and time-consuming part of the process, as the bankruptcy paperwork consists of over 23 separate forms. The forms cover every aspect of your financial life, and filing them out can quickly become repetitive and stressful. In an ideal world, you would hire a lawyer to complete this aspect of the process, but if you are not able to do this, then it might be an excellent investment to buy a bankruptcy software program.
Get Your Filing Fee
Although you are filing for bankruptcy, and money is in short supply, there are still fees that you are required to pay. Filing for Chapter 7 bankruptcy, for instance, requires a $335 filing fee. In certain circumstances, if you don’t have the $335, there is an option to complete a special form, which then permits you to pay the fee in installments. The maximum number of installments allowed is 4, and all of the payments must be paid within 120 days of your filing date.
If your situation is so bad that you cannot afford to pay in installments, there is a possibility that the fee can be waived. To qualify for a waiver, your total household income must be under 150 percent of the federal poverty line. It will be the decision of the court as to whether or not you qualify for a fee waiver. It is vital to take into consideration that if your application is denied, then the court will order you to pay the fee in installments.
Print Your Bankruptcy Forms and Bring them To Court
Now that you have all of your documentation prepared print off everything, sign it and get ready to take your documents to the court. The forms must be printed out single-sided, if you forget and print them out double-sided, the court will not accept them. It is also a good idea to contact the court and ask them how many copies they require. In most cases, it is only one copy, but it is better to take an extra copy and save yourself a wasted trip.
Go to Court to File Your Forms
This part of the process is one of the most important because once it is completed, you are then legally protected from your debt collectors. You will fall under what is known legally as an Automatic Stay, which essentially means that debt collectors are now legally prohibited from contacting you to try and collect your debts. They are also forbidden from garnishing your wages and foreclosing on your property. This protection will be in place until the end of the bankruptcy case and provided everything is completed correctly most if not all of your debts will be canceled as part of the bankruptcy process.
Do not be intimidated by the court, most people will be a little nervous, but there is nothing to be worried about. When you arrive at court, you will typically be met by a security guard, who will ask you to walk through a metal detector. Once you have successfully passed through security, the next step is to present yourself at the clerk’s office, which will be clearly signposted. Tell the clerk that you are here to file for bankruptcy. You will then hand over your completed bankruptcy forms, and the $335 filing fee. The clerk is unlikely to have any change, so it is advisable to have the exact fee when you present your forms. If you do not have the fee, you will need to hand over your completed waiver form, or fee installment form.
Once the clerk has all the paperwork, he or she will then process the case. It usually takes no longer than 15 minutes and involves them scanning and uploading your forms to the court’s online filing system.
Once this process has been completed, the clerk will give you three vital pieces of information.
- Your Bankruptcy Case Number
- The Details of Your Bankruptcy Trustee
- The Full Details of Your Meeting With Your Trustee, otherwise known as your 341 meeting. You will receive the date, time, and location of the meeting.
Mail Documents to Your Trustee
Your bankruptcy trustee is appointed by the court to oversee your case. You will receive mail from your trustee requesting specific documentation. Pay close attention to what is being requested as a failure to provide that information will halt the entire process. Typically, you will need to send your trustee your last two years of filed federal and state tax returns. For a Chapter 13 bankruptcy, this requirement increases to the previous four years of state and federal returns. Even if you have not filed a tax return for a few years, it is essential to provide the trustee, with the last federal and tax return that you did file. You need to send the full copy with all of the schedules and forms that you completed as part of the tax returns process. This is another benefit of having an attorney as they will generally complete this part of the process for you, but if you do not have an attorney, then this is your responsibility.
Take Bankruptcy Course 2
Don’t worry; you are nearly at the end of the process. The penultimate stage of bankruptcy requires you to complete a second class after you file your bankruptcy petition and documents. Upon successful completion of this course, you will need to file a B23 form with the court. This form is your evidence that you have completed an approved debtor education class. Failure to submit your B23 form and financial management certificate will mean that your case will not be discharged, so the quicker you file the form, the better. Generally speaking, a bankruptcy case will close four months after it was initially filed. Our advice would be not to file for bankruptcy in Alabama on your own, as it is quite a complicated process, but we understand that you may not be in a financial position to hire an attorney.
Attend Your 341 Meeting
Once the bankruptcy has been filed, you will have to attend a creditors meeting, otherwise known as a 341 meeting. You are obligated to attend this meeting, and you will need to bring proof of social security and another form of identification. Your trustee will question you about your documents, and the schedules which you filed at court. You should ensure you are prepared for this meeting, as the questions will all be about your assets, creditors, and income, so it would be very beneficial to know all of the answers. The good news is that most questions will only require a yes or no answer, and the interview will usually last no longer than about five minutes. Most of the questions will be about the procedure to ensure that you are aware of the documentation you have signed. Upon completion of the meeting, the trustee will close the case. In the vast majority of cases, unless something unusual happens, you will receive a letter about two months later from the court, stating that your debts have been discharged.
On to a fresh start!
Once you have received this letter, you are now free to move forward with your life. Your credit rating will be severely damaged, and it will take some time to repair it, but bankruptcy aims to give you a new start, rather than punish you forever. Learn from your mistakes, and take precautions to ensure wherever possible that you never find yourself in a similar position again, and then begin to live your life again free for the misery of debt.
The key to ensuring a smooth and hassle-free filing of bankruptcy is in planning and preparation. Make sure you have every piece of paper and documentation relating to your debts and your assets. Although an attorney might seem like an expensive luxury, their knowledge and experience can often prove invaluable during the process, so it might be worth speaking to friends and family to see if there is any way you can afford to hire one. Finally, do not let the past define your future, you can and will come out of this process, and there is no reason why you and your family cannot enjoy a fantastic future moving forward.
If you feel overwhelmed or want assistance, check out our free bankruptcy assistance and see if you’re a good fit for our service. We have a free service that makes the bankruptcy process super simple for residents of Texas.
The Means Test is the document used to determine if a debtor exceeds the Chapter 7 income limits. Here are some numbers that can help you quickly determine your eligibility.
If you want to learn more about the Means Test, read this article.
Median income levels for Texas
Poverty levels for Texas
|Summary About Assets and Liabilities||Download Now|
|Statement of Intention||Download Now|
|Statement of Financial Affairs||Download Now|
|Statement of Current Monthly Income||Download Now|
|Statement About Your Social Security Numbers||Download Now|
|Creditor Matrix||Download Now|
|Verification of Creditor Mailing List||Download Now|
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Frequently Asked Questions
There usually are court costs associated with filing for bankruptcy, and the costs will vary depending on the type of bankruptcy, and your current financial situation. At the time of writing, the cost of filing for a Chapter 7 Bankruptcy is $306 and for a Chapter 13 Bankruptcy $281. Some courts may also charge an additional administration fee. The good news is that in most cases, it is possible to pay the filing fee in installments. Some courts may also waive the filing fee for a Chapter 7 Bankruptcy if you can demonstrate that your income is below a certain level, and the court decides not to allow you to pay the filing fee in installments. Whether you use a company like Bankruptcy Help or an attorney, there will be additional fees payable, and it is standard practice to pay upfront for those services, particularly in the case of a Chapter 7 Bankruptcy.
It is a common misconception, that once someone is declared bankrupt that all of their debts are discharged, but this is not the case. The first thing to be aware of is that bankruptcy will not cover any debts which were incurred after you filed for bankruptcy, and which were not mentioned during the filing process. There are other debts that are not covered by bankruptcy. These include but are not limited to
• Student Loans
• Any Fines That Are Owed To A Government Unit Such As A City or State
• Any Outstanding Debts For Income or Property Taxes
• Child Support or Alimony Debts
• Any Fines You Have Received As Part of a Criminal Prosecution
Debts that you have obtained fraudulently may not be discharged. For example, if before filing for bankruptcy, and knowing that this was your intention, you decide to go on a spending spree with your credit card, spending money on a vacation, then this may be considered fraud if it can be proven that you had no intention to pay the debt.
In total, there are four different types of bankruptcy available to individuals, and each has specific conditions that must be met.
Chapter 7 - Perhaps the most well known and severe type of bankruptcy. This typically takes between two and three months and involves the sale of your residential property to pay off your debts.
Chapter 11 - A highly complicated process, predominantly targeted towards business debtors, but in some instances, it may be suitable for individuals with substantial debts and assets.
Chapter 12 - A type of bankruptcy very similar to Chapter 13, but exclusively available to family farmers and fishermen.
Chapter 13 - A court-supervised repayment plan which is designed to repay an agreed percentage of your total debt, over a period between 3 and 5 years.
Chapter 7 and Chapter 13 are the most frequently used options; Chapter 13 is preferable in most situations, as it enables the person filing for bankruptcy to retain their property, versus Chapter 7 where they must sell it to clear their debts.
The fact that you have filed for bankruptcy will be registered on your credit report. If you filed for a Chapter 7, then it will remain on the file for ten years, and for seven years if you filed for section 13. However, although obtaining credit will initially be more challenging, it will not prevent you from ever obtaining credit again in the future.
There are probably hundreds if not thousands of reasons why any honest hard-working individual could find themselves in financial difficulty. The bankruptcy laws were designed to provide people with a second chance, and a fresh start. On the other side of the equation, the laws were also intended to ensure that all creditors are treated equally. Once the bankruptcy process is complete, your creditors are prevented from trying to collect any outstanding debts, and as a consequence, you are then able to move forward with your life.
When a debt is said to be discharged, the debtor is no longer legally obligated to repay the debt, and the creditor is prohibited from trying to enforce payment. It is essential to understand that if someone else co-signed on an agreement, they would remain liable for the debt. Finally, if the debt was a secured loan, where you agreed to use property as collateral for the loan, then your creditor may still be entitled to repossess the property, should you not repay the loan. In situations like this, you are advised to speak to our friendly customer service team who will be able to provide you with the correct advice or provide you with the details of a bankruptcy lawyer.