What to Do Prior to Filing Bankruptcy in Texas

Bankruptcy is a type of federal debt relief that allows financially struggling Texans to reduce or eliminate approved consumer debts, such as medical and credit card bills. Most people opt to file either Chapter 7 to request elimination of approved debts or Chapter 13 to partially repay their debts. Texas residents need to complete a number of steps before filing bankruptcy.

Asset Considerations

Evaluate your assets before filing any type of bankruptcy, as you risk losing at least some of your assets if you declare Chapter 7. As of 2011, Texas residents could preserve all homestead equity and up to $30,000 of personal possessions, notes the Bankruptcy Action website. Court officials cannot take your retirement accounts regardless of your bankruptcy status, according to the book "How to File for Chapter 7 Bankruptcy." In some Chapter 13 cases, you may be required to pledge all or part of your next three tax refunds toward debt repayment.

Evaluate Your Income

Consider your income level before declaring Chapter 7 bankruptcy, as not every Texan economically qualifies for this type of debt relief. The usual standard of measure is the state's median income table. As of 2011, a single Texas resident could earn up to $38,940 a year and economically qualify to file Chapter 7, according to the U.S. Trustee Program. On the other hand, a family of four living in Texas could earn up to $66,381 annually. If you earn more money, you must prove through a federally devised means testing formula that you cannot partially repay your debts and support your family. Otherwise, you must declare Chapter 13 bankruptcy.

Get Credit Counseling

Before filing bankruptcy in Texas, you must complete a credit counseling session. If you don't fulfill this prefiling requirement, your petition will be denied. These types of sessions must be completed through a federally approved agency and usually last about an hour, notes the Federal Trade Commission.

Gather Required Information

You or an attorney you hire must provide quite a bit of information as part of the filing process. Recent tax returns, paycheck stubs, a full accounting of your assets and debts and bank statements are required to file bankruptcy. You also cannot include all of your obligations in bankruptcy; child support, alimony, court fines, damages resulting from criminal acts, debts incurred right before bankruptcy and future debts are ineligible for bankruptcy assistance.

References

• "How to File for Chapter 7 Bankruptcy"; Stephen Elias, et al.; 2009
• Bankruptcy Action: Texas Bankruptcy Exemptions
• Federal Trade Commission: Before You File Personal Bankruptcy -- Information About Credit Counseling and Debtor Education
• U.S. Bankruptcy Court Eastern District of Texas: General Questions
• U.S. Department of Justice: Census Bureau Median Family Income by Family Size