CHAPTER 7 BANKRUPTCY
Understanding the Basics
1 Bankruptcy Protection
If you are facing foreclosure, your paycheck is being
garnished, or you feel like you are drowning in bills,
IT MAY BE TIME TO CONSIDER BANKRUPTCY
A chapter 7 bankruptcy can provide
you with a fresh start while still
protecting your home and your
important assets in most cases.
2 US Bankruptcy Code
Bankruptcy protection is found in the U.S. Bankruptcy
Code, meaning that the federal courts have jurisdiction
over bankruptcy proceedings
An individual may file bankruptcy
under chapter 7, 11, 12 or 13
of U.S. Bankruptcy Code.
Chapter 11 -- Typically used by small businesses
Chapter 12 – Family farmers or fishermen
Chapter 13 – Wage earner plan
Used by debtors with
and/or valuable non-
Chapter 7 – Quickest way to a fresh start
Simplest and fastest chapter, it is the
most popular option for individuals
3 Chapter 7 Specifics
The vast majority of debtors who
file chapter 7 are able to retain
their assets due to strong exemption
laws under state and federal law
ALMOST ALL DEBTS ARE DISCHARG
in a Chapter 7 Bankruptcy
That means that creditors are forbidden
from trying to collect those debts from
people who have filed Chapter 7
Other chapters require debtor to
repay debts over time
4 The Means Test
Debtor must pass means test
TO FILE CHAPTER 7
Compares your income
to other Texas residents
If your income is over the
median for your area
it becomes more complicated
THE MEANS TEST
is a very complicated form.
You need an experienced
bankruptcy attorney to assist
you complete it.
5 Chapter 7 Process
Debtor completes credit counseling
course prior to filing
Petition and bankruptcy schedules
filed with bankruptcy court
The filing of the case creates an injunction
against all creditor collection activities.
No court order is necessary…
The filing of the case is all that it takes to
stop creditor collection.
The trustee is automatically appointed. The
trustee reviews the bankruptcy filings to
make sure they are correct and all assets are
properly claimed as exempt.
Meeting of creditors is held
20-40 days after filing at a conference
room at the court house.
No judge is present.
Creditors may ask about your
INCOME AND DEBTS
However, usually no creditors
show up to the meeting of
creditors in Chapter 7
Debtor must complete a debtor
education course – either online
or by watching a DVD.
Debtor is discharged from
virtually all debts.
The U.S. Bankruptcy Code includes exemptions that a
debtor may be entitled to use. Additionally, the
individual states may also create exemptions.
Texas allows a debtor to choose
between state and federal exemptions
Keeping Your Home,
Vehicle and Possessions
Texas has very pro-debtor exemptions that allow most
debtors to retain their homes, vehicles, and personal
Unlimited homestead exemption –
up to 10 acres in a city and up to 100 acres
in the country (200 acres if family)
Pets and livestock up to $30,000
($60,000 for head of household)
One vehicle per family member
Home furnishings, food, clothing, family
heirlooms, jewelry and two firearms
up to $30,000 in value
($60,000 for families)
Pensions and social security payments
are totally exempt.
IRA’s and Retirement accounts
are exempt up to $1 million.
Tools of the trade and farming
equipments are exempt as well.
Life Insurance is also exempt.
8 Debts That Cannot Be
Certain types of tax debts
Spousal and child support
Debts for personal injury caused by driving
under the influence of drugs or alcohol
8 Credit Post-Bankruptcy
Worrying about your credit after bankruptcy is
understandable; however, for most debtors their credit
improves significantly after a Chapter 7 bankruptcy.
Debt to income ratio improves the
day the bankruptcy is filed.
You cannot file a Chapter 7
Bankruptcy case for at least eight
Many debtors can secure car loan
during the Chapter 7 or after the
discharge if they have employment
or steady income.
Obtaining a mortgage loan may take
closer to two years post-bankruptcy
Want to Know More About
Chapter 7 Bankruptcy in Texas?
Get Your Bankruptcy Questions Answered
Click to visit: centraltexasbankruptcy.com
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