What to Do Before You Claim Bankruptcy in Texas
If you have more debt than you can handle, bankruptcy offers a way out. Although bankruptcy is a federal process, the details differ from state to state. Going through bankruptcy isn't a miracle cure, and if you aren't careful you could lose more money or assets than necessary. Knowing the law for Texas bankruptcies and planning well can minimize the risk.
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Preparation
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Before you submit anything to the bankruptcy court, federal law requires you attend credit counseling. The U.S. Trustee Program has a list of accredited counselors on its website that you can use to find a counselor for your section of Texas. You have to go through counseling in the six months before you file for bankruptcy.
Types
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You have to decide whether to file personal bankruptcy using Chapter 7 or Chapter 13 of the bankruptcy code, the U.S. Courts website states; if you're a family farmer, you can also file with Chapter 12. In Chapter 7, the court can seize your assets to pay off debts, then most of your remaining debt is wiped out; in Chapters 12 and 13, you draw up a payment plan to settle some of your debts over several years before the remainder is erased. To qualify for Chapter 7, your income for the six months before you file must be below the Texas median or you must pass a "means test" adjusting income for expenses.
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Considerations
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Before you file for bankruptcy, take a look at the kind of debts you owe. Bankruptcy won't erase them all, the U.S. Courts states; alimony, recent tax debts and child support can't be eliminated, for instance. Chapter 13 can't erase your mortgage; and Chapter 7 can wipe out the mortgage, but not the lender's claim on your house, so the lender can still foreclose. If debts such as these are the primary problem, bankruptcy can buy you time, but it won't make the debt go away.
Prevention/Solution
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Another factor to consider is how much of your property is safe from Chapter 7 sale in Texas. Texas has generous exemptions -- as of 2010, your home is completely exempt unless it's over a certain number of acres, and you can keep $30,000 in possessions -- but if you have vulnerable assets, you might consider Chapter 12 or 13, neither of which require you to sell your property.
Identification
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Before you file, you'll need to get your paperwork in order. The U.S. Courts state that you'll need to compile a complete list of your assets, income, expenses and creditors; regarding your creditors, you'll need to list who they are, how much you owe them and what sort of debt it is that you owe them. Do not omit anyone from the list; the court could throw out your petition if it thinks you're hiding information. Even if the judge doesn't catch you, you can't wipe out a debt if the court doesn't know about it.
Geography
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Determine the court where you're going to file bankruptcy. Texas has 14 different courts, stretching from Plano to Waco, and you can find the addresses on the U.S. Courts website. If you're not sure which court covers your county, you can find that information on the Bankruptcy Information website.
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