Houston Bankruptcy Attorney
How Does Bankruptcy Work?
Are you in debt? Have you fallen behind and can’t catch up? You are not alone.
Each year, hundreds of thousands of people take advantage of the federal bankruptcy laws to get relief from debt that is difficult if not impossible to pay. This may include credit card debt, medical bills, personal loans, and income taxes. The federal bankruptcy laws offer debtors the opportunity to reduce or eliminate their debts and gain a fresh start.
In 2014, the U.S. Bankruptcy Courts reported 936,795 bankruptcy filings, with 36,503 in Texas alone. If you’re contemplating a bankruptcy to resolve your financial problems, the legal team at the Westbrook Law Firm, PLLC can help.
The U.S. Bankruptcy Code has six types of bankruptcy, each named after a chapter of the federal law. More than half of the bankruptcy petitions filed each year are either Chapter 7 or Chapter 13, which relate to bankruptcy proceedings for individuals.
Which bankruptcy Chapter is best for you? The answer depends on your unique situation, including current income, expenses, and types of debt.
Comparing Chapter 7 and Chapter 13
The most common consumer bankruptcies are Chapter 7 and Chapter 13. Each type has different advantages and disadvantages.
- This type of bankruptcy, sometimes referred to “liquidation bankruptcy,” is typically used to eliminate certain unsecured debts through a “discharge order” issued to your creditors. The discharge order terminates the legal rights of certain creditors to collect on the debt, including credit cards, medical bills, personal loans and other unsecured loans.
- If your property is exempt (meaning there is a legal exemption to protect the property), you will not lose anything by filing Chapter 7. However, if you have non-exempt property (such as boats, extra vehicles, or real property that is not a homestead), a Chapter 7 Trustee will sell this property to pay your creditors. Although most non-exempt property is subject to liquidation, there are certain legal exemptions that may protect this property. Our bankruptcy team can help determine if these exemptions apply to your property.
- The whole process takes about 4 to 6 months to complete, and when it is over, you will be completely free from all dischargeable debts.
No Asset Chapter 7 Bankruptcy: The Only Thing You Lose is Your Debt
- Chapter 7 is a “liquidation” bankruptcy where you may lose non-exempt property. But if all of your property is exempt (which occurs in the majority of our cases), the Trustee will close your case as a “no asset bankruptcy” and your debts will be discharged, meaning you never have to pay them back – ever.
- Some debts are not dischargeable, such as student loans, child support, criminal restitution, and recent IRS tax debts.
- It’s important to maximize the benefits of your bankruptcy. With over 11 years of legal experience, the Westbrook Law Firm, PLLC does everything possible to help you during this difficult and stressful process.
- Chapter 13, also called a “wage-earner’s bankruptcy,” is typically used to protect important personal property from aggressive collection actions, including home foreclosure and vehicle repossession.
- If you’re behind on your mortgage payments and facing foreclosure, it’s crucial to act quickly and file your case as soon as possible (and definitely before any foreclosure sale date). Once a house is foreclosed, there is little you can do to save the home. A foreclosure can also impact your credit and cause significant roadblocks if you apply for financing on future homes.
- Chapter 13 requires you to file a plan that advises your creditors how you intend to repay your debts. The plans range from three to five years, depending on your income and debts. Most of our clients propose five-year plans, as this spreads the total debt over a longer period of time and reduces the overall monthly payment during the bankruptcy process.
- Unlike Chapter 7, Chapter 13 allows you to strip a second or third mortgage if the value of your home has significantly declined, and these loans are no longer collateralized by the value of the property.
- Similarly, if you purchased your vehicle more than 910 days before the bankruptcy filing, you can pay the value of the vehicle, as opposed to the claim amount, provided the value is less than what you owe. You can also take advantage of a 5.25% interest rate (unless you financed the vehicle at a lower rate).
- Most importantly, Chapter 13 allows you to keep any non-exempt property (including boats, stocks/bonds, money in savings, land, etc.), as long as you pay a certain percentage in the plan to your unsecured creditors. This is a significant difference from Chapter 7 where you may lose this property.
- At the end of the plan, your secured debt will be current, and any remaining unsecured debt will be discharged.
The Bankruptcy Process in Texas
When filing for bankruptcy, Texas offers more advantages to debtors than most states. Texas offers broad “exemptions” for certain assets you can keep when you file for bankruptcy. This is especially true for secured property, such as your home and vehicle.
The process of filing for bankruptcy in Texas has specific rules, called the “Bankruptcy Local Rules.” Some of the state-specific rules associated with filing for bankruptcy in Houston or other communities in Texas require you to:
- Take the “means test” to determine whether you’re eligible to file Chapter 7. If you are not (due to owning assets beyond what is allowed for this form of bankruptcy) you can file Chapter 13. Our Firm can properly guide you through the means test, as accuracy is extremely important.
- File for bankruptcy in the correct federal district, which is the area in which you have been living (for the longest period of time) for the prior180 days.
- Submit your list of debtors in alphabetical order.
- Provide a detailed inventory of your personal property, including type of property and value. Our Firm provides detailed intake forms to facilitate this process.
- File a feasible repayment plan with your petition, if you’re filing Chapter 13 (wage-earner’s bankruptcy).
- Pay the filing fee when the petition for bankruptcy is filed.
- Make sure you complete an approved pre-filing credit counseling course. Our Firm will provide you with a list of approved courses, which can be done online prior to filing.
- Attend a creditors’ meeting at the federal courthouse, where the Trustee and any creditors can question you about the filed documents in your case. We will attend this meeting with you and help you prepare. In many cases, the creditors will not show up. It’s more an informal meeting between you and the Trustee assigned to your case.
Many potential pitfalls are related to filing for bankruptcy, most of which are associated with failing to disclose information, submitting forms and documents incorrectly, and other procedural errors. A person attempting to file bankruptcy without an attorney can run into several difficulties that could delay the process and even cause the bankruptcy to be dismissed. In more serious cases, you could face criminal charges for problematic filings.
Don’t take chances when you file for bankruptcy. This is a complex legal process that requires specific experience with the various bankruptcy laws, courts, and trustees. You should hire a skilled and knowledgeable bankruptcy attorney to ensure your case proceeds smoothly and without any problems.
To discuss your financial situation, please call our Firm today. Our experienced legal team can help determine which Chapter is right for you.
The Automatic Stay
The advantages of consumer bankruptcy start very early in the process. As soon as you file your petition, the Bankruptcy Court will issue a court order – called the “automatic stay” – to your creditors.
The automatic stay restricts creditors from moving forward with any collection action while the bankruptcy is pending. This bankruptcy injunction puts an end to ALL creditor harassment, including those annoying phone calls, threatening letters, and lawsuits. Any creditor who continues a collection action could face serious legal consequences, including legal fees, court costs, and sanctions.
Qualifying for Bankruptcy Relief
In 2005, Congress amended the federal bankruptcy laws to curtail fraudulent and repeat filings. Despite these changes, the federal bankruptcy laws continue to offer significant debt relief to those who qualify and need help to resolve their overwhelming debts. The key is to meet with a qualified bankruptcy attorney to review your situation and determine if bankruptcy is right for your unique situation.
The Road to Financial Freedom Starts Here
Bankruptcy has helped millions of Americans stop creditor harassment, avoid home foreclosure, and resolve unpaid debts. Let the Westbrook Law Firm, PLLC help you.
Our goal is to relieve your financial problems with the least amount of stress and confusion as possible.
To speak with an experienced Houston Bankruptcy attorney today, please call the Westbrook Law Firm today at 281-815-4340. We offer free consultations in Houston and the surrounding areas. Stop letting debt ruin your life.