Who Qualifies for Bankruptcy in Texas?

If you are navigating a challenging financial situation and feel like all hope is lost, you may be asking, “Who qualifies for bankruptcy in Texas?” Bankruptcy offers relief to individuals and businesses when they are overwhelmed by debt and provides a chance for a fresh start. While this may sound immediately appealing, there are several criteria that must be present to qualify, and several types of debts cannot be forgiven.

How to Qualify for Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also referred to as liquidation bankruptcy, can apply when an individual is unable to pay off their debts. If they qualify, their non-exempt assets, like savings, property, and investments, can be sold or “liquidated” to pay off creditors. If they have debts beyond the amount that their assets can pay for, it is usually discharged or forgiven. To qualify for this type of bankruptcy, individuals or businesses generally have to meet the following criteria:

• Meet Income Requirements: The main requirement for Chapter 7 is that individuals pass a means test that compares their income to the median income in the state for a household of a similar size. If the income is below the medium, you qualify. They must then gather all financial documentation that accurately provides their asset information.
• Complete Credit Counseling: Credit counseling and financial management courses are generally required for individuals to qualify for bankruptcy.
• File for Bankruptcy: Individuals must officially file a Chapter 7 bankruptcy petition in their jurisdiction and pay a filing fee.
• Receive Discharge: If the process proceeds smoothly, parties will receive a discharge of eligible debts within months of filing for Chapter 7.

How to Qualify for Chapter 13 Bankruptcy

Chapter 13 bankruptcy is often thought of as an official financial reorganization of debt repayment rather than a liquidation of assets. Through this type of bankruptcy, individuals create an official repayment plan to pay off their debts over several years. After successful repayment by following their plan, remaining eligible debts can be discharged. To qualify for Chapter 13, the following must happen:

• Evaluation of Debts: Parties must first evaluate their debts and income to determine if Chapter 13 is the right choice for them.
• Credit Counseling: Parties must initially attend credit counseling before filing for Chapter 13.
• File for Chapter 13: Parties can file a petition for Chapter 13 bankruptcy in their jurisdiction, submitting information detailing income, assets, debts, liabilities, leases, a repayment plan, and more.
• Create Repayment Plan: The most essential part of Chapter 13 is the repayment plan. Individuals must get their repayment plan approved and follow it to pay back creditors to be successful.
• Receive Discharge: If individuals successfully complete their repayment plan, eligible debts may be discharged, and they will essentially be given a fresh financial start.

Long-Term Consequences of Bankruptcy

Bankruptcy holds severe long-term consequences, both positive and negative, that are helpful to be aware of before choosing to pursue this legal option.

Positive Consequences:

• Debt Relief - The most significant consequence related to bankruptcy is the discharge of all eligible debts. This provides a release from the burden of debt to individuals and businesses who do not have the means to pay back their debts, which allows for financial relief.
• Protection From Creditors - Bankruptcy provides protection and immediate relief from creditor claims, harassment, wage garnishments, and other collection tactics. After bankruptcy is filed, an automatic stay is triggered, which halts the pursuits of most creditors seeking debt collection.
• Opportunity to Rebuild Credit - Individuals’ credit will be negatively impacted, but there is the ability to rebuild their credit over time by managing finances and credit wisely.

Negative Consequences:

• Impacts on Credit Score: Bankruptcy will generally remain on credit reports for several years and lower overall credit scores, which can have negative impacts. These impacts can affect qualifications for loans, credit cards, good interest rates, employment, renting, and more.
• Public Record: As bankruptcy filings are public record, this means that anyone can access the information about a bankruptcy case, which can impact personal privacy.

The long-term and short-term consequences of bankruptcy will vary from case to case, depending on the individual circumstances of your situation and how you manage finances going forward. The support of an Irving bankruptcy lawyer can provide essential care and insight that can help mitigate some of these negative consequences over time.

FAQs

Q: What Are the Qualifications for Bankruptcy in Texas?

A: The qualifications for bankruptcy in Texas are:

1. You are unable to pay your debts.
2. Your individual or family gross income is at a lower level than the median income for the same size family in your state.

To calculate your gross income, you will combine your income from the past six months before filing and multiply it by two. If you earn less than the median, you may qualify for Chapter 7. If you earn over that amount, you may be eligible for Chapter 13.

Q: Can You Be Denied Bankruptcy in Texas?

A: You can be denied bankruptcy in Texas for several reasons. One may be that you do not meet the eligibility requirements for the type of bankruptcy you are applying for. Another may be that you are found to be abusing the bankruptcy system to avoid paying debts when you otherwise have the means to do so. Individuals who do not adhere to the system requirements, like filling out and filing paperwork or failing to comply with court orders, can be denied.

Q: How Much Money Can You Keep in Bankruptcy in Texas?

A: The amount of money that you can keep in bankruptcy in Texas depends on the type of bankruptcy you file for. As Chapter 13 bankruptcy involves a repayment plan rather than a full liquidation of assets, the amount that you can keep depends on your repayment plan, income, expenses, and other details. For Chapter 7 bankruptcy, most of your assets will be liquidated to repay debts, so this depends on the amount of assets you have and the extent of your debts.

Q: Why Would a Bankruptcy Filing Not Be Accepted?

A: Bankruptcy may not be accepted for several reasons, such as:

• Failure to meet the eligibility criteria
• Failure to adhere to court orders and necessary action
• Fraudulent or criminal behavior
• Not meeting credit counseling requirements

Some individuals are not accepted for bankruptcy because they previously filed for it, and they are ineligible to file again within a certain timeframe.

Contact a Local Bankruptcy Lawyer Today

As a local bankruptcy law firm, Steele Law Firm, PLLC, can offer essential and necessary support at a time when you need it most. By evaluating your case and exploring the options you have, we can help determine which type of bankruptcy or financial aid you qualify for. We can then guide you through each step of the process, ensuring that you navigate the complexities of bankruptcy law effectively. Consider reaching out to our firm today to set up a consultation and learn how we can support you.