Bankruptcy FAQs
CHAPTER 7 BANKRUPTCY FAQS
Do I Get To Keep My Personal Property?
You are entitled to keep a generous amount of your belongings when filing Ch. 7 bankruptcy. Texas law provides for high personal exemptions--items that are protected from seizure by your creditors. You will usually be allowed to keep all of your household goods. Other essential items (see below) may also be protected if they fall within the Texas or Federal exemption guidelines.
What Is The Difference Between Secured And Unsecured Debt?
Secured debt, such as mortgages, car loans, etc., is debt that is secured by property. Creditors can generally claim the property that secures the debt in the event of bankruptcy, unless you are current on the payments. Unsecured debt, such as credit card balances, medical bills, etc., is debt that is not secured by any type of property.
Can I Keep My Home?
Texas exemptions allow debtors to keep a homestead. Federal exemptions allow debtors to keep a certain amount of equity in a homestead. Equity is determined by subtracting the amount that you owe on your mortgage(s) from the fair market value of your home. The decision to select Texas exemptions or Federal exemptions to protect your home from foreclosure or liquidation should be made in consultation with an experienced attorney.
The “automatic stay” goes into effect the moment your bankruptcy petition is filed, and protects your home from foreclosure during the pendency of your bankruptcy. If you have a mortgage on your home, you MUST keep the payments current during and after the bankruptcy to avoid foreclosure. If you fall behind on your mortgage payments after filing bankruptcy, the mortgage company may ask for court permission to lift the automatic stay and begin foreclosure proceedings.
If your home is "upside down," meaning you owe more on the home than it's worth, we might recommend that you voluntarily surrender the home, which allows you to get out from under that crushing monthly debt, and purchase or rent a less expensive home after bankruptcy.
Can I Keep My Vehicle(s)?
Texas exemptions allow debtors to keep a motor vehicle. Federal exemptions allow debtors to keep a certain amount of equity in motor vehicles. Equity is determined by subtracting the amount that you owe on your motor vehicle from the fair market value of your motor vehicle. The decision to select Texas exemptions or Federal exemptions to protect your motor vehicle from repossession or liquidation should be made in consultation with an experienced attorney.
The “automatic stay” goes into effect the moment your bankruptcy petition is filed, and protects your motor vehicle(s) from repossession during the pendency of your bankruptcy. If you have a loan on your vehicle, you MUST keep the payments current during and after the bankruptcy to avoid repossession. If you fall behind on your loan payments after filing bankruptcy, the mortgage company may ask for court permission to lift the automatic stay to repossess your motor vehicle.
If your car is "upside down," meaning you owe more on the vehicle than it's worth, we might recommend that you surrender the vehicle, which allows you to get out from under that crushing monthly debt, and purchase or finance a less expensive car after bankruptcy.
Will I Lose My Retirement Savings?
Most retirement savings plans are fully protected by the Employee Retirement Income Security Act (ERISA), and are fully protected in bankruptcy. Also, Individual Retirement Accounts (IRAs) and 401(k) accounts are generally fully protected in bankruptcy. We can help you determine whether your specific retirement account will be protected in bankruptcy so you can keep the savings for your retirement.
When Will The Harassing Phone Calls From Creditors Stop?
Once your bankruptcy petition is filed, you and your creditors will receive an official notice from the United States Bankruptcy Court regarding the pendency of your case. The automatic stay goes into effect the moment your bankruptcy petition is filed, and creditors are immediately prohibited from contacting you.
What Debts Can’t Be Discharged In A Ch. 7 Bankruptcy?
The debts that cannot be discharged in a Ch. 7 bankruptcy include the following:
- Debts for taxes owed to local, state or federal agencies.
- Debts for money, property, services, or an extension, renewal, or refinancing of credit, which were obtained fraudulently.
- Debts that were not included in the schedule of debts.
- Domestic Support Obligations, such as child support, spousal support, etc.
- Debts for most government-sponsored or –guaranteed student loans.
- Debts arising from a court judgment for death or personal injury caused by the debtor's drunk driving or from driving while under the influence of drugs or other substances.
- Debts incurred after a bankruptcy was filed.
Will I Ever Get Credit Again?
Yes, a bankruptcy can actually clean up your credit report in the sense that your credit report should show zero balances owed to your unsecured creditors, rather than the tens of thousands of dollars that you may currently owe, and may reflect better than repossessions, foreclosures or even late payments. Bankruptcy will typically improve your debt-to-income-ratio, which is an important factor that many creditors consider when extending new credit. Although a Ch. 7 bankruptcy may remain on your credit report for up to 10 years, most people resume normal credit activities immediately after receiving their discharge. The interest rates may not be prime, and some waiting periods may apply, but you can begin re-establishing your credit immediately, as long as you stay current on your payments. However, we will counsel you to change your spending habits to get away from dependence on credit and to avoid the credit trap in the future.
Can I Keep Any Credit Cards?
Whether a debtor keeps credit cards after filing bankruptcy is entirely up to the credit card issuer. If you are seeking a discharge of a credit card balance, that credit card issuer will most likely cancel the card unless you reaffirm the debt. Even if you have a zero balance, the credit card company might cancel the card when they discover you have filed for bankruptcy.
Can My Boss Fire Me Because I Filed For Bankruptcy?
No. 11 U.S.C. Sec. 525 prohibits any employer from discriminating against you because you filed bankruptcy.
I Filed For Bankruptcy Before. When Can I File Again?
A new Ch. 7 case can be filed 8 years from a previous Ch.7 bankruptcy filing or 6 years from a previous Ch. 13 filing.
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