It can be intimidating to file for bankruptcy, but it may be the right decision for some homeowners. When considering bankruptcy, knowing your options and the bankruptcy process can be helpful.
This article will provide an overview of bankruptcy in Texas and outline the steps you need to take if you decide to file. So, whether you’re considering bankruptcy or just want to learn more about your options, keep reading.
What Is Bankruptcy?
Bankruptcy laws provide people with a fresh start by liquidating their assets and, sometimes, creating repayment plans for their creditors.
Among the goals of bankruptcy laws are:
- Eliminate most of the debts of honest debtors to give them a fresh start.
- Pay debtors timely if there is property to repay.
When Should You Consider Filing for Bankruptcy?
When considering bankruptcy, it’s important to understand that it’s not the best option for everyone.
Below are some signs that you may need to file for bankruptcy:
- You’re being threatened with foreclosure.
- You’re constantly contacted by debt collectors.
- You’re using your credit cards to pay for rent and food.
- You’re unable to work a payment plan with your creditors.
- You’re unable to stay current with your mortgage payments.
Is Bankruptcy the Only Way Out?
Make sure you weigh all your options before considering bankruptcy. Taking credit counseling or settling your debts are two alternatives to bankruptcy. If you are unsure which option is right for you, a financial advisor can assist you.
In addition to reducing your monthly payments, consolidating your debt can also reduce the amount of interest paid. As a result, you will save money on interest and be able to pay off your debt sooner.
You can also negotiate directly with your creditor as reaching an agreement can save you from bankruptcy.
The Types of Bankruptcy
There are two main types of bankruptcies available for individuals in Texas: Chapter 7 and Chapter 13.
Chapter 7
Chapter 7 bankruptcy is usually the first option considered because it can be completed quickly and does not require creditors to be repaid. Aside from that, it’s a good option for people with minimal work and living needs since they won’t lose unnecessary luxury items. Last but not least, Chapter 7 bankruptcy won’t allow you to catch up on your mortgage or car payments, so if you’re behind when you file, you’ll lose them.
Chapter 13
Chapter 13 filers, in contrast, are given three to five years to repay their debts. Unlike Chapter 7, Chapter 13 prevents you from losing your house or car to foreclosure or repossession. Furthermore, your creditor may be willing to negotiate a payment plan with you if you are unable to discharge your debt.
How to File for Bankruptcy in Texas
Some people are deterred from filing bankruptcy due to the cost of a lawyer. While the cost of bankruptcy attorneys is the most expensive part of filing for bankruptcy in Texas, you don’t need an attorney to proceed.
Below are the steps to do so.
- Gather Your Texas Bankruptcy Documents: You will need copies of your tax returns from the previous two years and your last 60-day pay stubs.
- Take a Credit Counseling Course: Learn more about the credit counseling course here.
- Fill Out the Bankruptcy Forms: You can download the forms free through USCOURTS.gov.
- Pay Your Filing Fee: Chapter 7 bankruptcy requires a court filing fee of $338. When your income does not exceed 150% of the poverty guidelines in Texas, you can request a filing fee waiver.
- Print Your Bankruptcy Forms: Make sure to print all forms on regular, white 8.5″ x 11″ paper using black ink.
- File the Forms With the Texas Bankruptcy Court:
There are four federal judicial districts in the Lone Star state, and your county determines which district you’ll file in. There are separate divisions and courts in each district. Check to see what filing options are available for your court location once you have determined the court location that will handle your case.
The four districts generally allow the following filing methods:
- Eastern District: Lawyers can access the court’s official electronic filing system, but debtors without attorneys have a simplified electronic filing option. You can also file in person, by drop box, or by mail with the court.
- Northern District: You can file in person, by mail, or by drop box.
- Western $ Southern District: You can file in person or by mail.
- Mail Documents to Your Trustee: You will be assigned a trustee after filing for bankruptcy.
- Take Another Course: Attend a debtor education course within 60 days of the 341 meeting.
- Attend Your 341 Meeting: Your creditors can attend this meeting to ask questions.
What Happens After You File for Bankruptcy in Texas?
The majority of your unsecured debts will be discharged when you declare bankruptcy. However, student loans, child support, and alimony are not dischargeable in bankruptcy. Depending on your bankruptcy choice, you may also have to surrender certain assets. Furthermore, bankruptcy does not cover debts incurred after filing.
Will Bankruptcy Affect Your Credit Score?
After filing for bankruptcy, your credit score will temporarily drop. Your credit score will reflect the bankruptcy for seven to ten years, depending on the type of bankruptcy you file. By consistently following a few financial tips, you can rebuild good credit and reverse the damage that has already been done.
Rebuilding your credit can be achieved through the following actions:
- Taking out a small loan.
- Applying for a secured credit card.
- Maintaining a good payment history.
- Staying on top of your credit report for errors.
- Becoming an authorized user on a credit card.
Sell Your House for Cash & Avoid Bankruptcy in Texas
Having to file for bankruptcy is a frightening prospect, and most people try to avoid it at all costs. Selling your house may be the answer to your financial woes if you are overwhelmed by debt and worried about your future. You can avoid bankruptcy and regain your peace of mind by working with a trusted home buyer. Contact us at Favor Home Solutions today to learn more about how we can help you sell your home quickly as-is, without agent fees, and hassle-free!
