Bankruptcy Exemptions and Texas Law: To File or Not To File

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Bankruptcy Exemptions and Texas Law: To File or Not To File

New research suggests good news for the economy of Texas. While the region has witnessed several significant Chapter 11 corporate bankruptcy filings in the first half of 2013, the state’s three largest cities, Houston, Dallas and San Antonio, have among the lowest consumer bankruptcies in the United States. However, much has been written on whether bankruptcy is the right choice for those in serious financial dire straits. If an end to debt-collection phone calls and letters sounds tempting, making an application for bankruptcy can bring peace of mind. However, there are other alternatives. Bankruptcy law in Texas can provide assistance and allow a debtor to make a clean start rather than living with debt that they will never be able to pay off.

Texas bankruptcy means test

For a consumer, there are two main types of bankruptcy. A Chapter 7, or “no asset” bankruptcy is the most popular and if you have non-exempt property or equity, most unsecured debts will be wiped clean in a few months. If an individual still owes money when filing for Chapter 7, this is protected by exemption laws or given to a secured creditor as collateral. Chapter 13 bankruptcy involves a process which takes much longer. A court trustee monitors the spending of the bankruptee and a strict budget must be adhered to. Chapter 13 allows people to catch up with secured debt payments like mortgages over time without giving up their property. Means-testing decides which type of bankruptcy you can apply for, taking into account your bills and income, other debts and your general financial situation.

A debtor will need to seek professional, confidential and helpful legal advice. Busby & Associates can provide such a service. We can help prepare the financial paperwork needed to file for bankruptcy, offer legal services in repossessions or foreclosure and offer a no-hassle consultation to discuss your options.

Texas bankruptcy exemptions

If an individual is to file for bankruptcy, they must consider all legal implications. Insurance policies like liability insurance become property of the estate and the bankruptee may have not have the legal right to claim on any policy or cover. This could have a detrimental effect if the individual is part of a small business. According to, liability insurance is essential for any business and that without it, the business could have further serious financial consequences. Depending on the type of cover, it can cover legal fees and payments of compensation or cover the business if it needs to pay out to a member of the public after a legal dispute. The Cato Institute suggests that this piece of bankruptcy legislation will affect the US economy as small businesses are a vital contributor in providing new employment opportunities for others. With this in mind, the individual will need to consider if bankruptcy is the best option if business interests are involved.

Under Texas Exemption legislation, a debtor may not need to file for either Chapter 7 or Chapter 11 bankruptcy. Credit card and medical bill debts are “unsecured” and even though penalties and interest will continue to be levied against the debt, harassing phone calls or letters can be stopped by way of contacting the creditor. Other forms of debt, such as tax debts or unpaid child support payments are not protected under Texas bankruptcy exemption law however, and even if an individual decides to file for bankruptcy, these types of debt will not be written off by the courts.

Chapter 7 and Chapter 11 bankruptcy in Texas

Bankruptcy is never an easy decision and the debtor should seek help immediately. In several cases, it may be the only solution to an ongoing history of debt problems and bankruptcy law can provide valuable benefits to individuals who need it. Figures from the American Bankruptcy Institute reveal that 11,996 people in Texas filed for bankruptcy in the third quarter of 2012. This is down from the 13,306 who filed in the same quarter in 2011, suggesting debtors are seeking alternatives to Chapter 7 or Chapter 11 bankruptcy.

It is important to learn what bankruptcy can and cannot do by seeking legal advice. The consequences of filing for Chapter 7 or Chapter 11 bankruptcy could outweigh the benefits of alternative measures.


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