Frequently Asked Questions Related to Texas Bankruptcy Law
At The Law Offices of Cheryl S. Davis, P.C., I am always happy to answer my clients’ questions on all aspects of bankruptcy and other types of debt relief. Here are some brief answers to some of the frequently asked questions I get from my clients:
- What types of bankruptcy are available to me as an individual?
- What are the qualifications for filing a Chapter 7 bankruptcy?
- Must I satisfy the means test to file for Chapter 7 bankruptcy if I am in the military or a veteran?
- What are the qualifications for filing a Chapter 13 bankruptcy?
- What is an automatic stay?
- Can I get all my debts discharged?
- What effect will bankruptcy have on my credit score?
There are two primary forms of personal bankruptcy. Chapter 7 bankruptcy, also called liquidation, results in the discharge (cancellation) of your debts, with some exceptions. You might have to turn over some assets to help repay your creditors, but you are entitled to keep some property as a result of either federal or state exemptions. In Chapter 13 bankruptcy, also known as reorganization, you can satisfy your obligations under a more affordable court-approved debt repayment plan that normally takes three to five years to complete.
To obtain a debt discharge through Chapter 7 bankruptcy, you must qualify under the means test. This standard is designed to ensure that people who have sufficient income or assets to repay what they owe are not given Chapter 7 relief. However, even if your finances qualify you under the means test, you could be denied if you have received a bankruptcy discharge within the last eight years, were dismissed from a bankruptcy within the last 180 days or defrauded your creditors.
This depends on your individual circumstances. If you are a disabled veteran and your debts were incurred while you were on active duty or performing a homeland defense activity, the means test is waived. If you are a reservist or member of the National Guard on active duty or performing a homeland defense activity for at least 90 days, you are excluded from the means test for 540 days thereafter. You might also benefit from the Servicemembers Civil Relief Act.
You don’t need to satisfy the means test, but must have sufficient disposable income to meet your debt repayment obligations under the plan. You must also prove that you are current with your tax payments and not subject to disqualification due to your prior conduct.
It is a rule that stops your creditors from pursuing any claims against you outside of the bankruptcy process. An automatic stay bars creditors from communicating regarding debt collection and from issuing debt-related penalties, such as service cutoffs by utility companies, while the bankruptcy is pending. The court can lift the stay if good cause exists to do so.
Not necessarily. Some types of debts are usually non-dischargeable, such as tax obligations, back child support and student loan debt. Furthermore, a creditor can object to the discharge of the debt owed to them. I can help you understand what debts you can expect to be released and which are likely to remain.
Credit agencies operate independently so there is no definitive answer. While bankruptcy might lower it, if you need serious debt relief, your credit score probably had already been lowered significantly. After filing for bankruptcy, you can start the process of rebuilding your credit.