Items you will need
- Debt, asset and income documentation
- Credit counseling (for Chapter 7)
Changes to federal bankruptcy laws in 2005, designed to discourage Chapter 7 liquidation filings, have done nothing to discourage or lower personal bankruptcy proceedings, according to The Wall Street Journal. Total bankruptcy filings in 2009 increased by 32 percent, to 1.41 million--the highest number since 2005, when people rushed to file bankruptcies ahead of the tougher bankruptcy filing laws. Many people, being in an already fragile financial situation, choose to forgo hiring an attorney to help with their bankruptcy filing. Although federal law dictates bankruptcy filings, state laws come into play, and Texas is no exception.
Research the differences between Chapter 7 and Chapter 13 bankruptcies. Chapter 7 basically is a liquidation of your assets, with certain protections, to pay off your debts. Chapter 13 is a reorganization of your debts, coupled with a two- to five-year payment plan, to provide you the opportunity to restructure your debt and pay it off in a reasonable time period. There are advantages and drawbacks to both types of filings that you should recognize.
Find out if you even qualify for a Chapter 7 filing. The 2005 bankruptcy laws include a “means” test to determine if you qualify for liquidation proceedings or if you must file for a Chapter 13 reorganization plan. You can complete an online form to determine your status.
Review the Texas state laws that apply to personal bankruptcy filings. Like most states, Texas allows for personal property exemptions ($30,000 for single adults; $60,000 for adults with families). But these exemptions also come with restrictions. There also are considerations for military personnel, terms for wages versus self-employed earnings, and medical and insurance exemptions.
Make an appointment with a credit counselor. Federal law states that people filing “pro se” (without an attorney’s help) must receive counseling from an approved provider 180 days prior to filing for bankruptcy.
Find out in which of the four district courts in Texas you need to file. There are southern, northern, eastern and western district courts attached to federal courts in Texas. Each court has its own filing requirements and forms. You can find out with which court you need to file and also obtain all necessary forms and paperwork online.
Complete the necessary forms, make copies or otherwise provide the required supporting documentation, and file your bankruptcy proceeding with the appropriate court. This will include a form documenting all your debts, assets and income information, so make sure to gather all the necessary information. You’ll also have to pay filing and administrative fees, typically about $300. A Chapter 7 filing can be completed in a few months. Chapter 13 is a two-to-five-year plan.
Inquire about pro bono attorneys. Many law firms and government agencies will provide low-cost or free legal services if you qualify.
Chapter 7 filings are for people with little or no personal property. Chapter 13 proceedings usually are initiated by people who have significant home equity or other substantial property holdings.
You’ll be required to attend meetings with and report regularly to an administrator or trustee overseeing your bankruptcy.
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