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Texas Bankruptcy - Chapter 7 Bankruptcy

Chapter 7 under the Bankruptcy Code is a process known as a liquidation bankruptcy because the trustee in a Chapter 7 Bankruptcy can sell any non-exempt or unprotected assets and pay the money available to your creditors. In a Chapter 7 Bankruptcy, most debts (with the exception of child support, alimony, certain taxes, and other non dischargeable debts) are eliminated, and the debtor generally loses only non-exempt property.

On October 17, 2005 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 changed some of the provisions of the Bankruptcy Code which affect eligibility for consumers to file for Chapter 7 Bankruptcy. Since these Changes in the new Bankruptcy Law there is now a process which uses a standard mathematical formula called The Bankruptcy Means Test to determine whether or not you can file for Chapter 7 Bankruptcy. (Those who fail the bankruptcy means test, are left to file a Chapter 13 Bankruptcy which is a Bankruptcy Court supervised repayment plan or individual debt adjustment.)

With all the media attention the New Bankruptcy Law was given purporting the end to Personal Bankruptcy you might think this new test will prevent you from filing Chapter 7. But, chances are, you're wrong. The majority of people considering bankruptcy have no trouble passing the bankruptcy means test. Chapter 7 liquidation under the Bankruptcy Code is still an available form of Debt Relief.

Despite the term liquidation, in a Chapter 7 Bankruptcy, property is rarely liquidated, since most property is protected by exemption under Texas State law. When an asset is exempt from legal process, a bankruptcy trustee cannot take the property. A debtor in Texas can choose either the Texas Bankruptcy Exemptions or the Federal Bankruptcy Exemptions.

The purpose for filing a Chapter 7 Bankruptcy is usually to discharge a debt, or to cancel some debtor obligations. A Chapter 7 petitioner does not have to make payments out of his or her future income to have their debts discharged. A Chapter 7 Bankruptcy asks the Bankruptcy Court to erase your dischargeable debts forever. It is important to understand that some debts cannot be discharged in a Chapter 7 Bankruptcy.

Bankruptcy under Chapter 7 of the Bankruptcy Code is often referred to as "liquidation bankruptcy" or a "straight bankruptcy." A Bankruptcy Court can relieve a debtor of the responsibility to pay most of his or her debts under Chapter 7 but still allow the debtor to keep much of his or her property. A Chapter 7 bankruptcy is available to both individuals and businesses but there tends to be more individual Chapter 7 filings than those of businesses. When an individual files for Bankruptcy it is often referred to as Consumer Bankruptcy or Personal Bankruptcy.

A debtor begins the bankruptcy process by filing a petition with his or her local bankruptcy court. Once the petition is filed, an "automatic stay" goes into effect and the creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossession. Along with the petition, or shortly thereafter, the debtor files various written "schedules" and "statements" to inform the Court of his outstanding debts, his current income and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. Upon receipt of the Petition, the Court appoints a Bankruptcy Trustee to handle the debtor’s case. The Trustee determines what assets, if any, it can collect from the debtor to sell to pay off the creditors. The Trustee can only collect certain assets, known as "non-exempt" assets, from the debtor. The debtor can keep his "exempt" assets if he chooses (and wants to continue to pay for as debts on those assets are not discharged).

Since Texas law generally exempts a single debtor’s home, furniture, furnishings, motor vehicles, and additional personal property up to $30,000.00 and married couples to $60,000.00; most debtors only have "exempt" property. Once the Trustee sells the debtor’s "non-exempt" property, if any, and distributes the proceeds to the creditors, the Bankruptcy Court discharges the debtor’s remaining debt (other than alimony and child support, student loans, most tax obligations, and debts resulting from fraudulent or malicious acts) and concludes the bankruptcy proceeding.

Each case is different and is particular to the individual facts and circumstances of that specific situation. It is important to seek experienced counsel to learn your legal options under the Bankruptcy Code. Chapter 7 may allow you to address your debt.

If you are Knee Deep in Debt or in danger of losing your house, your car, or other property, and/or are tired of creditors’ harassment, contact us today. We can help you decide if Chapter 7 Bankruptcy is for you. The only thing you may have to lose is your debt. 1-800-436-9056


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