Dallas Chapter 7 Bankruptcy Attorneys
Helping Texas Clients Maximize the Benefits of Chapter 7 Bankruptcy
When you suddenly lose a job, suffer a medical emergency, or experience some other form of crisis that derails your finances, debt can easily sneak up on you. Despite smart spending and budgeting, many are unfortunately one calamity away from being unable to keep up with mounting payments.
You do not have to feel helpless in the face of overwhelming debt. Bankruptcy exists to help Texans get back on their feet and work to overcome their debt. Chapter 7 is designed for those without sufficient monthly disposable income to partially pay back debts. The process includes liquidation, in which certain elements of your estate are sold to compensate creditors. Once the process is completed, a bankruptcy court can grant you the ability to discharge most or all of your unsecured debts.
Facing bankruptcy alone can be an intimidating prospect, especially if you are not familiar with Texas’s Means Test or how to properly safeguard your estate through smart use of state or federal exemptions. Our Dallas Chapter 7 bankruptcy lawyers at The Law Office of Truman E. Coe, P.C. have over 40 years of combined legal experience and can guide you through each step of the process. Our team can determine if you qualify and whether Chapter 7 makes sense for you, assist in your formal filing, prepare your estate for liquidation, and represent you before bankruptcy court.
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Does Chapter 7 Bankruptcy Make Sense for Me?
Chapter 7 may not be the right choice for everyone. You will have to pass the state’s Means Test (discussed below) to determine if you qualify. You should also consider what types of debt Chapter 7 can help you discharge as well as how much of your estate is covered by liquidation exemptions.
Situations where Chapter 7 bankruptcy often makes sense include:
- You lose a job and are unable to find comparable employment
- You or a loved one suffer a severe injury or illness, requiring protracted and expensive hospital stays
- You are forced to use credit cards to pay for necessities, resulting in debt ballooning well beyond your ability to reasonably repay
Credit card debt, medical debt, and personal loans are just a few examples of unsecured debt, which refers to any obligation not secured by some form of collateral. Chapter 7 bankruptcy enables you to discharge most unsecured debts. If most of your debt is rooted in credit card and medical bills, for example, Chapter 7 bankruptcy may make sense for you.
Do I Qualify for Chapter 7 Bankruptcy?
Individuals are generally only eligible for either Chapter 7 or Chapter 13 bankruptcy. Below are the requirements for filing for Chapter 7:
- You must be able to pass the “means” test.
- You cannot have filed a previous bankruptcy within a certain period.
- The bankruptcy court must not believe you are cheating creditors
If you filed for Chapter 13 in the last 6 years, you cannot file for Chapter 7. If you have already discharged a debt within the last eight years via Chapter 7, you are not allowed to file. Finally, you cannot file if you had a previous Chapter 7 case that was dismissed in the last 180 days for any of these reasons:
- You violated a court order.
- Your case was filed fraudulently.
- You requested a dismissal.
What is the Means Test?
To determine which you qualify for, you will need to undergo the Texas Means Test. This involves assessing your current ability to potentially repay a portion of your outstanding debt.
First, you will evaluate your current level of income and compare it to the median average for your household size in Texas. If your income is less than the median for your household size, you automatically qualify for Chapter 7 bankruptcy. Many people who have lost a job and continue to struggle to find meaningful employment will meet this requirement as their average income drops.
If your current income meets or exceeds the Texas median for your household size, you still may qualify for Chapter 7 bankruptcy, but you will need to do a few more calculations. You must determine your monthly “disposable income” by subtracting qualifying expenses from your current income. If a bankruptcy court determines the resulting amount is high enough, you will likely qualify for Chapter 13 bankruptcy, instead, and be expected to use some of the amount to partially repay creditors.
Individuals with a large array of expenses, such as a costly mortgage and car payments, may qualify for even if they have a higher-than-average income. Our Chapter 7 bankruptcy attorneys in Dallas can assess your financial situation and help you determine if you are eligible.
Once you have established you qualify for Chapter 7, you will need to complete a credit counseling course before formally filing. This establishes that you are serious about financial prudence in the future. We can help you identify qualifying courses.
What Happens When I File for Chapter 7 Bankruptcy?
Once you have completed your credit counseling course and are confident you pass the Texas Means Test, the next step is to formally file for Chapter 7 in your judicial district. Upon receiving your filing, a bankruptcy judge will issue an automatic stay, a court order that halts all collection actions from proceeding against you. The automatic stay is a powerful benefit that stops foreclosures, repossessions, and creditor harassment.
Next, the contents of your estate will be placed in a trust controlled by the bankruptcy court. They will assign a trustee to manage the estate’s liquidation process. This can sound scary, but we will review how the state’s exemptions can safeguard your property below.
Once the liquidation process is completed, the bankruptcy judge will in most cases authorize you to discharge unsecured debts. This can include credit card debt, medical bills, and personal loans. Before the discharge can take place, you will need to complete an eligible debt management course, which we can help facilitate.
Will I Lose My Home and Other Property in Liquidation?
Liquidation is possibly the scariest conceptual element of bankruptcy. The thought of losing any of your property can be daunting, much less something as essential as your house, car, or any items of sentimental value.
The good news is you are always permitted to exempt assets in Chapter 7 bankruptcy. Texas also has some of the most generous state-level exemptions in the entire country. You will be permitted to make your exemptions from state or federal exemption schedules, but you cannot pick and choose from both. We can advise on which makes sense for you.
Texas’s bankruptcy exemptions include:
- The Homestead Exemption. Texas is a rare state that permits an unlimited exemption for your home, meaning you should not in most circumstances need to give up your house during liquidation. In order to qualify for the exemption, you will need to have lived in the state for at least 2 years. The property must be less than 10 acres in total size within a city or less than 100 acres if outside a city’s limits. If you have a family, properties outside city limits can generally be up to 200 acres and still qualify.
- Vehicle Exemption. You are able to exempt the full value of one vehicle per licensed household member. That means if you are a family of 3 and your child is at least 16 with a driver’s license, for example, you can fully exempt up to 3 vehicles.
- Personal Wage Exemption. If you are an W2 employee who has earned wages that have yet to be paid out, that income is exempt from bankruptcy-related seizure.
- Insurance Policies. Life insurance policies offer an unlimited exemption if the named beneficiary is a dependent or family member.
- Retirement Savings Accounts. Funds placed in employer-originated retirement accounts are generally protected from bankruptcy liquidation. These include 401(ks) and many IRA accounts.
- Medical Tools and Funds. Any equipment or medication that is prescribed by a doctor to treat a medical condition is exempt from bankruptcy proceedings. Additionally, funds stemming from benefits meant to treat these conditions are also exempt, meaning elements like social security disability income are typically safe.
- Personal Property Exemption. This is a wide category set at $50,000 for individuals. It can include furniture, appliances, clothing, and tools. Jewelry is also included but can only account for $12,500, or 25%, of the total exemption value.
These generous exemptions equip many Texans to protect a great majority or even the entirety of their personal property. With the right strategy, you will not have to give up your home or vehicle during liquidation.
If you are married and have a family, your exemption thresholds can be set even higher. Property that is jointly owned with a spouse generally doubles the exemption limit. If you have a family, for example, you can exempt up to $100,000 in personal property.
We Can Help You Maximize the Benefits of Chapter 7
A smart Chapter 7 bankruptcy filing can equip you with the tools to discharge overwhelming debt while protecting most or even all of your most cherished assets from liquidation. Our Dallas bankruptcy lawyers can work with you to identify how to exempt as much of your property as possible, minimizing the impact of liquidation while giving you all of the benefits of the bankruptcy process. Our goal is to help you chart a new financial future free of crushing debt.
At The Law Office of Truman E. Coe, P.C., we emphasize results through individualized attention to our clients’ cases. Our team will work with you one-on-one through each step of the Chapter 7 process to make sure you are getting the most out of your filing.