If you’re struggling financially, declaring bankruptcy gives you the opportunity to pay down a portion of your debts over time or have some of them eliminated entirely through “discharge.” Sounds like a great solution for when times get tough, right?
There are, however, specific procedures to understand before filing for bankruptcy, as well as potential consequences to your credit and other facets of your life which can last for many years.
Whether or not to declare bankruptcy is an important decision and not one to be made lightly. We are asked all the time by clients:
- What happens if I declare bankruptcy?
- What happens after bankruptcy?
… and so many more questions. For that reason, we want you to be informed going into the process, and to help we’ve put together real-world advice and answers to some of the most frequently asked questions (FAQs) our Houston bankruptcy lawyers answer when helping bankruptcy clients.
What Happens When You File Bankruptcy?
What happens when you declare bankruptcy? After you file bankruptcy you are granted an “automatic stay,” which is essentially a block put in place to keep creditors from trying to collect on debts.
Creditors almost always try to collect on debts through Texas State Court breach-of-contract claims. This is why bankruptcy happens in federal court, where federal actions have the power to preempt state court actions under the Constitution. What this means is that after filing bankruptcy, your creditors can’t deduct money from your bank account, garnish your wages, evict you from your home, repo your car or go after any of your other assets while your bankruptcy is ongoing.
What happens after you file bankruptcy is that you are given a case number and a trustee is assigned to your case. You will next be scheduled to attend credit management classes, as well as a creditors meeting between you, your trustee, and any creditors who wish to be heard. During the meeting, which is more like a conference than a trial, the trustee will ask you questions about your financial status.
One question we often hear is “if you declare bankruptcy can you leave the country?” The answer is yes, as long as you are present for all of your scheduled meetings.
Chapter 7 bankruptcy is one of the two main types of bankruptcy available to individual filers. It is often called liquidation bankruptcy because what happens when you file Chapter 7 Bankruptcy is that you will likely need to sell off some of your assets to satisfy at least a portion of what you owe.
However, the State of Texas provides a substantial number of exemptions from bankruptcy, including your home, personal vehicle, personal effects, and a certain sum of money in the bank. You should be able to hang onto these and other property, even in bankruptcy.
With a Chapter 13 bankruptcy, you don’t need to worry about selling off any of your property to satisfy your debts. Instead, your debts will be reorganized with the help of the bankruptcy trustee so that you can pay them off partially or in full during the next three to five years. Note that following the repayment plan is essential, or else bankruptcy protections dissolve and your property can be exposed to creditors.
FAQs About What Happens When You Declare Bankruptcy in Texas
We’ve organized answers to some of the questions we hear most often, below, along with links to more information from The Law Offices of Seth Kretzer.
The material on our site is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as a legal opinion or legal advice regarding any specific issue or factual circumstance. This information is not intended to create, and receipt of it does not create, an attorney-client relationship between you and The Law Offices of Seth Kretzer.
Are Bankruptcies Public Records in Texas?
Are bankruptcies public records in Texas? Yes.
Chapter 7 and Chapter 13 individual bankruptcy records, Chapter 11 business bankruptcy records, and all related public bankruptcy filings are publicly-filed documents that can be located by anyone who signs up for an online account with the federal court’s Public Access to Electronic Records (“PACER”) system.
Can I File for Bankruptcy and Keep my House?
If I file for bankruptcy, can I keep my house in Texas? Yes.
Filing for bankruptcy and keeping your house is a very real possibility in Texas, due to the Texas Homestead law exemptions. This law permits you to file bankruptcy and keep up to ten (10) acres of a homestead in a city, town or village, and up to one-hundred (100) acres in a rural area. Plus, once you make it to the light at the end of the tunnel of the bankruptcy process, you should be in a stronger financial position to pay your mortgage and to keep your home.
Can I Keep My Car If I File Bankruptcy in Texas?
Can I file bankruptcy and keep my car in Texas? Most likely yes.
In the State of Texas, there are several options for filing bankruptcy and keeping your car, motorcycle, SUV, or other personal vehicle. If you take no actions on your vehicle loan when you file for Chapter 7 or Chapter 13 bankruptcy, you may be relieved of your obligation to repay your car loan afterward, and your car also will most likely not be repossessed.
This is due to Texas’ generous personal vehicle exemption, which protects your much-needed personal vehicle from repossession. You can also reaffirm your car loan or redeem the vehicle, which are recommended actions.
How Many Times Can You File Bankruptcy in Texas?
Can you file bankruptcy more than once in Texas?
The Bankruptcy Courts set no limit on how many times you can file for bankruptcy in Texas, understanding that the program was designed by our federal government to provide people struggling with their debts a fresh start. However, the courts do apply a greater degree of scrutiny to returning filers when it comes to granting discharges of debts.
How Long Does Bankruptcy Stay on Your Credit Report?
A large component of how to come back from bankruptcy has to do with how long your credit is negatively impacted by bankruptcy, and this depends mainly on the type of bankruptcy you file. Chapter 7 bankruptcy remains on your credit report for ten (10) years, while Chapter 13, which involves a structured repayment plan, stays on your credit report for a shorter period of seven (7) years.
Does Bankruptcy Stop Foreclosure in Texas?
Can bankruptcy stop foreclosure in Texas? Usually, yes.
Using bankruptcy to stop foreclosure by filing for either Chapter 7 or Chapter 13 Bankruptcy can provide temporary relief. When you file for bankruptcy, the court automatically issues an order that includes an automatic stay on all other actions.
The automatic stay directs your creditors to cease their collection activities immediately and to not file actions in state court, including foreclosure actions. However, the lender is within its right to file for a motion to lift the stay, which could re-expose your home to foreclosure.
Does Bankruptcy Stop Garnishment in Texas?
Can bankruptcy stop garnishment in Texas? Yes, Bankruptcy will stop garnishment, provided the debts are dischargeable ones.
In some cases, you may even be able to have garnished wages from before you filed your bankruptcy returned to you. There are, however, a few exceptions. Garnishment cannot be halted for debts tied into public goods, such as child support, alimony, student loan repayment, or IRS tax liability.
For Tailored Bankruptcy Representation, Contact The Law Offices of Seth Kretzer Today
When trying to figure out to manage your financial affairs during the bankruptcy process, you will need a lawyer with specific experience on bankruptcy in Texas and who has the right knowledge and resources to help you.
Contact The Law Offices of Seth Kretzer today to discuss the details of your situation.