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Bankruptcy FAQ

bankruptcy

Disclaimer: Please understand that the following is not meant to serve as legal advice, but is merely meant for informational purposes.  This information is not meant to replace the legal advice of a trained Attorney.  We encourage you to call one of our Attorneys to learn more.

Who Can File for Bankruptcy?

Almost any individual or business may file for bankruptcy, though individuals who have filed for Bankruptcy previously may be ineligible to re-file right away and for certain periods of time thereafter.  Most individuals or businesses who file for bankruptcy do so because their debt to income rastio (i.e. the amount they owe versus the amount of income they bring in each year) is simply too high for them to be able to realistically pay off their creditors.

What are the different types of Bankruptcies?

The two main types of Bankruptcy for individuals are Chapter 7 and Chapter 13.  The main type of Bankruptcy for a business is Chapter 11.

Chapter 7 Bankruptcies are typically the most favorable for individuals who wish to file for Bankruptcy.  In a Chapter 7 Bankruptcy, the Banktrupcy Trustee will allow you to keep your Exempt Property (which is discussed below) if you continue making payments on those pieces of property.  Since Texas laws relating to Exempt Property are very favorable to debtors, most individuals are able to keep the vast majority of their assets.  While most individuals have very few assets outside of the list of "Exempt" assets, if you do have any major assets outside of your Exempt Property, those assets are liquidated to pay your creditors.  Once this process is complete, all of your debts (other than those excluded by law, such as child support obligations and tax obligations) will be forever discharged (meaning you will be free from those debts).  Because your debts are fully discharged, this type of Bankruptcy can be very favorable to many individuals who are swamped with credit card debts, payday loans, medical bills, personal loans, or other unsecured debts with high interest rates.

Chapter 13 Bankruptcies are typically the best choice for people who: 1) Are behind on their house payments and their house is about to be foreclosed upon; 2) Are behing on their car payments and their car is about to be repossed; or 3) Those Individuals who have too much income to qualify for Chapter 7.  In this type of Bankruptcy, we are able to work with the Trustee to reduce your debts and create a payment plan to pay the lowered amount out over time.  Thus, this type of Bankruptcy can provide a great deal of relief in the form of greatly reduced debts and lower monthly payments overall.

Your Bankruptcy Attorney will be able to discuss with you which type of Bankruptcy is right for you in your unique situation.

What assets will I be able to keep in my bankruptcy (i.e. what assets are "Exempt" under Texas Law)?

Texas has very favorable laws for debtors in terms of keeping a long list of "Exempt" Property in Bankruptcy.  The list includes your home (up to 10 acres in an urban area), car, home furnishings, clothing, personal effects, and several other types of assets.  If you wish to keep these assets in your Bankruptcy, we will alert the Bankrutpcy Trustee of your choice, and you will just be required to continue making any applicable loan/mortgage payments on those properties in order to keep them if you are current on your payments at the time of filing.  If you are behind on your mortgage payment, car loan, or other loans relating to any of these exempt properties, you will need to either catch up in order to keep the property in a Chapter 7 Bankruptcy, or work with your attorney to instead file a Chapter 13 Bankruptcy, which can allow you to catch up on those payments over time.  

Will Bankruptcy Stop the Constant Calls, Lawsuits, Foreclosure of my Home, and Reposession of my Car?

Yes.  As soon as you file for Bankruptcy, the Bankruptcy Court will notify your creditors and they will be required by law to stop all calls to you, cease all lawsuits, and put a hold on any home foreclosure or car repossession.  


Should I Continue Paying My Creditors If I am Sure I am Going to File for Bankruptcy?

You will need to talk to your attorney about your individual situation, but in most cases, it is best to stop paying all creditors other than those who hold mortgages/loans on Exempt Property that you want to keep.  This is important for two reasons: 1) So that you will not accidentally make preferential payments to one creditor and not another (which can cause major problems in your Bankruptcy); and 2) So that you will have the funds necessary to pay the filing fees and attorney's fees associated with filing for Bankruptcy (discussed below).

Will I ruin my spouse's credit if I file for Bankruptcy?

Typically, no.  In most Bankruptcy filings, you are not required to jointly file with your spouse if you do not wish to do so, which will allow them to keep their credit intact.


What happens when I file for Bankruptcy?

In order to begin your Bankruptcy, you will meet with our Bankruptcy Attorney to go over the particulars of your unique case.  At this time, your Attorney will be able to answer any questions you may have and go over the whole process step-by-step.  At this meeting, we will give you a list of all the financial statements and other financial and personal information that we will need to be able to file your case.  Once you get us those documents, we take care of the rest of the filing process by drafting your Bankruptcy Petition.  Before we file, you have to take one other step in taking a short credit counseling class, which can typically be done very inexpensively online.

Once we file your Bankruptcy Petition with the Bankruptcy Court, an automatic stay will go into effect.  This automatic stay means that no creditor can call you or harass you in any way, and that all lawsuits, foreclosures and repossessions must stop immediately.  

In a typical Chapter 7 case, the Court will set an informal Meeting of the Creditors within 30-60 days.  At this meeting, which both you and your attorney will attend, a court-appointed Bankruptcy Trustee will ask you and your attorney general questions about your bankruptcy filing to make sure that everything has been done correctly and that all assets and debts are properly listed.  

After this meeting, the Trustee will perform several important functions in the weeks/months after the meeting, and will then issue a Notice of Discharge to you.  This Notice of Discharge will signify that you are free from your debts and the bankruptcy process is complete.  

Please note that this process differs in several ways for Chapter 13 Bankruptcies, and your Bankruptcy Attorney can explain more about the exact details of that process.


What is the cost of filing for Bankruptcy and how will I be able to pay?

In most Bankruptcy cases, there are only three costs associated with your case:
1) The Bankruptcy Filing Fee (paid to the Court) - $299 (in most cases)
2) Attorney's Fees - $1,500-1,750 (for most Chapter 7 Bankruptcies) or $2,750-$3,000 (for most Chapter 13 Bankruptcies)
3) The Cost of taking two short credit-counseling courses (typically around $50 - $60 online)

It has been our experience that in most cases, when the individual stops making payments to their creditors, they are able to use that money to pay these fees.  While some of these fees may need to be paid up front, please call us if you need a payment plan, and we can typically create a payment plan for your case that works well.

Why should I hire Cook & Gore to help me in my Bankruptcy?

Our Attorneys are committed to walking you step-by-step through the entire Bankruptcy process.  Our approach is to make sure we spend the time and effort necessary to make sure you fully understand what is going on at each stage of the process, and to provide each client with an individualized approach to their case.  Our Bankruptcy Attorneys have knowledge about what type of Bankruptcy may be most appropriate for you, and can ensure that your case is done right with as few headaches as possible for you personally.  Click here to read Client Testimonials from satisfied clients of Cook & Gore.