If you are considering a chapter 7 or 13 bankruptcy in the Houston or Galveston Divisions of the Southern District of Texas, but are unsure what options are available, our Houston bankruptcy attorneys and debt relief agency can help. Filing for bankruptcy in Texas can bring peace of mind, end to collection calls, and helps to stop repossession in Texas. The following information explains more about different bankruptcy types and about repossession, foreclosure and exemptions in Texas.
Chapter 7 bankruptcy is sometimes called as a “straight” bankruptcy, or “liquidation” bankruptcy. This chapter is available to individuals, married couples filing jointly, or married couples filing individually. Corporations and businesses can also file under chapter 7. Chapter 7 takes about four months from the filing date to discharge. The costs for a chapter 7 usually start around $1,400 and can go as high as $10,000 if you are trying to close a business. Most consumer cases are less than $2,000 at our firm.
This law firm is a debt relief agency. In addition to other services we offer, our attorneys help people to file for bankruptcy relief under the U.S. Bankruptcy Code.
Given the powerful reach of a Chapter 7, the law restricts how often you may file. Generally, you can only get a discharge in a Chapter 7 bankruptcy every eight years. This prevents debtors from abusing the system by engaging in a “cycle of discharge.” In most cases, debtors in Texas can keep personal property and homestead. Please see our section on exemptions for further information on Texas Exemptions. Non-exempt property is turned over to your trustee who will sell the property to pay your creditors.
Under Chapter 7, when the petition is filed, a bankruptcy estate is created out of all of the debtor’s property. Theoretically, all of your pre-petition property is now owned by the bankruptcy court, and may be sold by the Bankruptcy Trustee, and the proceeds used to pay off the debts. However, this rarely happens in a Chapter 7 Bankruptcy. You are required to claim property as exempted and the trustee along with the creditors have 30 days after the meeting of creditors to object to claim of exemptions. Our attorneys will sit with you after you have provided a list of your property to determine if you should use Texas or Federal Exemptions.
Chapter 13, also called “debt adjustment for regular wage earners,” allows you to spread out your debts over a period of 3 to 5 years. You are required to submit a Plan to the court which details how much you propose to pay each creditor. If approved by the court, these payments are to be made to the Trustee who then makes distributions on your behalf to your creditors. As an incentive to file for Chapter 13, the law allows discharge of more types of debts under chapter 13 bankruptcy than under Chapter 7 Bankruptcy.
Texas law provides that a creditor with a lien upon personal property may repossess the collateral if the purchaser is in default pursuant to the terms of the contract. The creditors need not to give you a notice of the repossession before they take the collateral. However, the creditor can get a court order, called a writ of sequestration. While a creditor may repossess without notice, and without a court order, the creditor is not allowed to repossess the property if the repossession involves a breach of the peace. You will need to tell us your story in order for a member of the firm to make a determination if there was a breach of the peace in your case. In a chapter 13 bankruptcy you can cure the default with the auto creditor and sometimes you can “cram down” the vehicle to the current value of the vehicle instead of paying the full principal balance back to the creditor. You must have owned the vehicle for at least 910 days to “cram it down”. If you have owned it less than 910 days then you can still “cram down” the interest rate but not the principal. The bankruptcy court also requires you to maintain a full insurance on the vehicle and to go under a wage order or automatic bank draft if you are self-employed as a condition of allowing you to cure your default and keep the vehicle.
The repossessed vehicle is taken to a storage lot or auction house, where it’s stored for a period of time. The vehicle is then sold usually at an auction. You must be given in advance, a reasonable notice of the date, time and place of the sale, which is usually 10 days after the repossession.
During this period of time you can file a chapter 13 Bankruptcy in Houston, if you qualify, and we may be able to get your vehicle back. You will need to show that you have full coverage insurance on the vehicle with a $500 deductible. Also, you may have to pay storage fees and the cost of the repossession. If the vehicle is sold at auction at less than what you owe on the vehicle, then you may be liable for the balance owed. This debt is now unsecured but they can still file a lawsuit against you and attempt to collect on the debt until you work something out with the creditor or you may file bankruptcy in which case the creditor may receive as much as the full amount owed or as little as nothing on the deficiency. The statute of limitation in Texas is four years for breach of contract. If you are being sued on a repossession deficiency that occurred more than four years ago, then for attorney help you should immediately call me on my direct line at (832) 485-1375.
Foreclosure is the process by which mortgaged property is sold upon default to satisfy mortgage debt. If the property is your principal residence, within Texas, then lenders must give you at least 20-day notice of their intent to accelerate a mortgage. Written notice of the foreclosure sale must be “posted” at the courthouse in the county where the property is located at least 21 days prior to the sale. The sale always occurs on the first Tuesday of the month at the courthouse where the sale has been posted. Most people file a chapter 13 bankruptcy when their house (homestead) has been posted for sale.
Please be advised that there are five liens which can be foreclosed on in Texas against your homestead. They are:
1. Purchase Money Mortgage
2. A proper Home Equity Loan
3. Property Tax Lien
4. Material Man’s Lien
5. Lien of Partition from a divorce
A Chapter 13 bankruptcy in Houston may allow you three to five years to catch up on your payments against the mortgage company. Also, you can pay other debts in the chapter 13 to include past due homeowner’s association dues, income taxes, property taxes, and credit cards. Depending on the classification of the debt as either secured, unsecured, or priority, the creditor may receive pennies on the dollar or as high as dollar for dollar plus the contractual interest rate. In both, Houston and Galveston divisions of the Southern District of Texas, you are required to pay your on-going mortgage plus your cure on your arrears through your trustee. If you are current on your mortgage when you file, but are filing a chapter 13 bankruptcy because you are behind on a vehicle or credit card payment, then you can still pay your mortgage direct, but you must remain current throughout the bankruptcy up to the date of the discharge.
You must live in Texas for at least two years prior to filing in order to use Texas exemption laws in bankruptcy. Otherwise, you must use the exemptions available in the state where you used to live. This sometimes can be a complicated process as some states do not allow you to use their exemptions unless you live in the state. The bankruptcy code states that if this is the case, then you can use the Federal Exemptions. Please note that you can live in Texas and not file bankruptcy but use the Texas exemptions on establishing residency in Texas. The federal bankruptcy exemptions are only available if you file a bankruptcy. If you are a homeowner, the Texas exemptions are usually the better set of exemptions to claim. Renters do better under the Federal exemptions. Exemption planning is a part of the bankruptcy process and bankruptcy attorneys of our firm can assist you in planning out the best way of protecting your property from the collection efforts of your creditors and ex-spouses.