How to File Bankruptcy in Houston Texas
Understanding how to file bankruptcy requires you to understand what bankruptcy is about. Bankruptcy is a creature of federal statute. This means that the bankruptcy laws that protect you come from the United States Congress. The bankruptcy laws are codified under Title 11 of the United States Code. The good thing about bankruptcy being federal is that the code and bankruptcy rules are uniform as applied in each state and territory. Of course local rules and state by state exemptions do cause the code variations among each state.
There is a bankruptcy court in each district in the United States. Here in Houston Texas, we are in the Southern District of Texas. Within this District sits the Houston division which handles cases in Austin, Brazos, Colorado, Fayette, Fort Bend, Grimes, Harris, Madison, Montgomery, San Jacinto, Walker, Waller, and Wharton counties. The Galveston Division that handles cases in Brazoria, Chambers, Galveston and Matagorda counties.
Although there is a Bankruptcy Judge assigned to each case, once you file your case, you rarely interact much with the Judge. Under Chapter 7 and Chapter 13 bankruptcy cases, most of your administrative case functions are handled by a 3rd-party Trustee who is appointed to oversee your case. You can find a list of Chapter 7 Trustees here and the two Chapter 13 Trustees David Peak and William Heitkamp. Of course should any disputes arise, the Judge will be there to hear your facts and make a ruling based upon the laws and rules.
Part of learning how to file bankruptcy requires you to understand what hearings or meetings are required. Once a case is filed, Chapter 7 bankruptcy and Chapter 13 bankruptcy Debtors have to attend a meeting of creditors. This meeting is overseen by the bankruptcy trustee. Locally, these meetings are held on the 3rd floor in a small conference room located outside the United States Trustee’s Office, which is located at the United States Federal Courthouse, 515 Rusk Street, Houston, Texas 77002.
Every Debtor is required to prove their identity with a government-issued ID card and prove their Social Security number with either their card or some other official document. This meeting is frequently called the “341 meeting" by bankruptcy lawyers because the bankruptcy law section that deals with the meeting is located in Section 341 of the United States Code. In a Chapter 7 bankruptcy case, you Debtor must also complete an official questionnaire about their assets and financial information.
By learning how to file bankruptcy, you also understand the purpose and goal of filing for bankruptcy protection. The purpose is to provide you with a fresh start. Your fresh start allows you to start over free of debt or in a reorganized repayment plan with rules that protect you from overzealous creditors.
In the end, your goal is to get your Bankruptcy Discharge. Your discharge releases you from personal liability from most of your unsecured debts. This means that your creditors cannot ever take any action against you to collect on this debt ever again. Should a creditor take an action against you on a discharged debt, you have remedies against the creditor that may include getting them to immediately stop the action and even recover money from them in the form of sanctions.
Generally the discharge in a chapter 7 bankruptcy comes about three and half months after you file. In a chapter 13 bankruptcy, because it is a repayment plan, you would expect to receive your discharge about 30 to 60 days after you complete your payment plan.
When learning how to file bankruptcy, you also need to understand that some types of debts will NOT be discharged. This is why it can be very important to consult with a bankruptcy lawyer first before you file a bankruptcy case. Some typical non-dischargeable debts include debts procured by fraud, child support, certain income and/or sales taxes, certain student loans, debts owed for the intentional death or injury to a person and some criminal fees or fines. Sometime whether a debt is dischargeable comes down to the facts or circumstances of the debt in question.
The main consumer bankruptcy cases are provided for under Chapter 7 and Chapter 13 of the bankruptcy code. Chapter 11 is a common bankruptcy and usually reserved for corporations or high-income/net worth individuals. Chapter 12 bankruptcy is for family farmers and fisherman and Chapter 9 bankruptcy is reserved for municipalities.
When learning how to file bankruptcy, you will see that Chapter 7 bankruptcy is the most common. On average about 75% of the bankruptcies filed are Chapter 7 cases. And when most people think of bankruptcy, they think of Chapter 7. Chapter 7 is also known as a liquidation bankruptcy.
In the absolute sense, the job of the bankruptcy trustee appointed to your case is to take things of value and sell or auction them off to receive cash which would go to pay unsecured creditors. It does not matter if there is enough money to pay all claimants. Even if the Trustee could pay everyone back 20 cents on the dollar, an asset auction will occur. If this scares you, then you understand that filing for bankruptcy is a very serious business and if you do it wrong, you could subject you and your family’s assets to be liquidated and sold.
The good news is that 99% of Chapter 7 bankruptcies do NOT involve a liquidation of assets. The reason for this is that you are allowed to exempt and protect a certain dollar amount of assets. This would include your house, cars, household furnishings, retirement plans and sometimes it may mean protecting cash and investments. Again, most people who file bankruptcy have no problem keeping all of their assets because there is little no non-exempt assets. However, if you have assets that are worth a lot of money, you may subject them to seizure to pay your bills if you don’t know what you are doing.
The other requirement when learning how to file bankruptcy is that every consumer is subject to a means test. This could mean that you would not qualify for chapter 7 bankruptcy if you make too much money. It makes sense really. Most people who make well over $100,000 are not going to qualify for Chapter 7 bankruptcy. The good news is that the means test affects less than 3% of the people who file. If you make under the median income for your family size here in Texas would not even be subject to the means test. The other good news is that if you do not qualify fro chapter 7 bankruptcy, then you would still be eligible to seek a discharge of your debt through a Chapter 13 repayment plan.
The Chapter 13 bankruptcy is the other common consumer filing and represents about 25% of all consumer cases filed. The Chapter 13 bankruptcy is also call a reorganization or repayment plan and even sometimes called a wage earners plan. This is because the plan is designed to help your reorganize or restructure your secured and unsecured debt. To do so, you must have regular income. However, this does not mean that wage income from a job is required, it just means that you need any regular income source like your small business, unemployment, pension, social security or even regular month family help.
When you read about how to file bankruptcy, you will see that the procedural and paperwork requirements of Chapter 13 bankruptcy are much greater than Chapter 7 cases. The attorney fees are also higher as well. In a Chapter 13, you submit a proposed payment plan to the Court. The plan spells out how you will pay back secured debt like home payments, mortgage arrears, property taxes or pay off a car or truck loan. It also spells how you pay back income taxes or child support. Finally, it spells out which unsecured debts you will pay back and how much. Most debtors in bankruptcy typically only pay back just a few pennies on the dollar of their unsecured debt. So even though you may not get a 100% discharge in a Chapter 13 like you would in a Chapter 7, you still will likely receive a 96-98% discharge. That can still be very significant.
Once you file the plan, you will ask the Court to approve it or confirm it. Many times, you will first meet your judge at this confirmation hearing. Once the court approves your repayment plan then you continue to make the monthly payments until the plan ends. You typically remain in possession of all of your assets while in the payment plan. You can make changes in the plan through a plan modification where you can give a car that broke down back to the finance company or lower your payment or decrease the number of months in your repayment plan.
As you learn how to file bankruptcy, you learn that the legal process can be very complex. Many times it is worth the expense of hiring an attorney to help you navigate the process. This overview on how to file bankruptcy is just a small example of the processes involved. It for informational purposes only and cannot be construed as legal advice.