FIRST YOU NEED TO SEE IF YOU QUALIFY TO FILE A CHAPTER 7 STRAIGHT BANKRUPTCY OR MUST YOU FILE A CHAPTER 13 PAYOUT PLAN.

Note-if you obtained a discharge in a previous Chapter 7, you must wait 8 years from the date of filing the previous case before you can file another Chapter 7.

 

A. ARE YOUR DEBTS PRIMARILY CONSUMER?

If your debts are primarily consumer, meaning charges for personal items, you may not be able to file a Chapter 7 bankruptcy unless your income is below your state’s median income. The median income for Texas as of February 2008 is $36,285 for a family with one adult, $51,355 for two earning adults, $53,337 for a family with three earning adults and $61,856 for a family with four earning adults, and an additional $6,900 for each additional earning adult over four. If you are above this, you must submit to a Means Test (click here for more info) to determine if you are eligible for a Chapter 7. Certain health and other necessary expenses may also make you eligible on a case by case basis. If you are not eligible, you may file a chapter 13 bankruptcy which is a five year payout plan based on a budget.

B. ARE YOUR DEBTS PRIMARILY FROM A BUSINESS FAILURE?

If the majority of your debts are from a business failure, you may be exempt from the means test and able to file a chapter 7 bankruptcy.

C. ARE YOUR DEBTS PRIMARILY FROM TAXES OWED IRS?

If the majority of your debts are from income taxes owed to IRS, (not 941 taxes) you may be exempt from the Means test and able to file a chapter 7 bankruptcy and discharge your taxes. However, other requirements apply in your particular case. I advise consulting with an attorney to determine your particular case.

        1. Tax returns must have been filed more than two years ago.

        2. Taxes must have been due more than three years ago

        3. The tax assessment must be more than 240 days old

        4. Tax return must not be fraudulent or a willful attempt to evade the tax

        5. Other events can change the dischargeability such as liens filed by IRS or substitute returns.

 

SECONDLY, IF YOU QUALIFY FOR A CHAPTER 7 BANKRUPTCY. SOME DEBTS ARE NOT DISCHARGED IN A CHAPTER 7.

Under the New Bankruptcy Law, more debts are not affected by a Chapter 7 Bankruptcy. Some examples are listed here. Note that this is a general list and not meant as legal advice, your case may differ depending on the circumstances.

A. RESTRICTED DISCHARGE OF DEBTS MAY EXIST IN THE FOLLOWING CASES:

 

    1. Consumer debts owed to one creditor for more than $500.00 incurred within 90 days of filing a Chapter 7

    2. Cash advances owed to one creditor more than $750.00 within 90 days of filing the case

    3. Charges to pay taxes or any non-dischargeable debt owed to any governmental entity

    4. Educational loans whether private and personal are non-dischargeable

    5. All marital property settlements, divorce agreements and child support are non-dischargeable

    6. Debts owed to a pension or money owed retirement plan are not discharged

    7. All secure purchase money debts and UCC secured debts must be paid or the property returned .

B. CERTAIN TRANSFERS OF PROPERTY BY THE DEBTOR MAY BE RESTRICTED. Note than most transfers of property in the ordinary course of business are protected but for other transfers of property, the bankruptcy Trustee can examine the debtors property transfers for an entire ten years before the bankruptcy was filed.

THIRDLY, EXEMPTIONS IN TEXAS HAVE CHANGED.

A. State exemptions available if the debtor lived in Texas for two years prior to filing bankruptcy.

The amount of exemption of your real estate homestead is based on date of acquisition of home. It may be limited to $125,000 equity unless in you have been in Texas more than 3.5 years.

B. Personal property must be valued at the replacement value for property of that age and condition which is the cost a retail merchant would charge without deduction for cost of sale or marketing.