Dallas Bankruptcy Attorneys
Chapter 7 Bankruptcy Lawyers
Bankruptcy can be a viable solution for individuals in Texas who are burdened by overwhelming debt. By filing for bankruptcy under Chapter 7 or Chapter 13, debtors can find a fresh start and regain control of their financial future. This article provides an overview of the bankruptcy process, the means test for Chapter 7 eligibility, and the exemptions available under Federal and Texas law for personal and real property.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows eligible debtors to discharge their qualifying debts and obtain a fresh financial start. Here’s an overview of the process:
- Filing the Petition: The debtor initiates the process by filing a petition with the bankruptcy court. They must provide detailed information about their assets, liabilities, income, expenses, and other financial matters.
- Automatic Stay: Upon filing, an automatic stay goes into effect, providing immediate relief from collection efforts by creditors. This means creditors must cease all collection activities, including lawsuits, wage garnishments, and phone calls.
- Means Test: Chapter 7 has income requirements, and debtors must pass the means test to qualify. The means test compares the debtor’s income to the median income in Texas. If the debtor’s income is below the median, they typically qualify for Chapter 7. Otherwise, they may need to explore Chapter 13 bankruptcy.
- Liquidation: In Chapter 7, a bankruptcy trustee may liquidate certain non-exempt assets to repay creditors. However, Texas law provides generous exemptions that often protect most or all of the debtor’s property.
Exemptions for Personal and Real Property
When filing for bankruptcy in Texas, debtors can choose between the federal bankruptcy exemptions and the exemptions provided under Texas law. Here’s a breakdown of the exemptions available for personal and real property:
- Property Exemptions Under Texas Law
- Homestead Exemption: Texas provides an unlimited homestead exemption, allowing debtors to protect their entire home equity from creditors.
- Vehicle Exemption: Debtors can exempt up to $60,000 in equity for a motor vehicle if they are disabled or over 60 years old. For non-disabled debtors, the exemption limit is $30,000.
- Personal Property: Texas law provides generous exemptions for personal property, including clothing, furniture, appliances, and more, with varying limits.
- Rural Homestead Exemption: Debtors can exempt up to 100 acres of rural property (200 acres for a family) or an urban homestead with a limit of 10 acres (if located within a municipality).
Texas Chapter 7 Bankruptcy Income Limit
Below are the household income levels for Texas for bankruptcy cases filed on or after May 15, 2023. The figures change every 6 months or so. If your household size is greater than 9, you would add $9,900 for each additional family member.
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