Top Qualifications for Bankruptcy in Texas

 Posted on August 05, 2024 in Qualifying For Bankruptcy

Financial distress is overwhelming, but bankruptcy provides options to people suffering from a burden of debt which they feel they may never get out from under. Understanding the qualifications for bankruptcy in Texas can help you make informed decisions about your financial future. A Texas lawyer will walk you through the factors determining bankruptcy eligibility. With legal guidance, you can move forward with the most strategic option for your situation.

Make Sure You Understand the Bankruptcy Types in Texas

Before discussing qualifications, you should understand the two primary types of personal bankruptcy available in Texas:

• Chapter 7 bankruptcy: Individuals can wipe out the majority of their unsecured debts through Chapter 7 bankruptcy, commonly known as "liquidation bankruptcy.

• Chapter 13 bankruptcy: Reorganization bankruptcy, also known as Chapter 13 bankruptcy, allows individuals to develop a three- to five-year repayment plan for their debts.

Qualifications for Bankruptcy in Texas

Means Test

The means test is crucial in determining eligibility for Chapter 7 bankruptcy. If your income falls below the Texas median for your household size, you are eligible for Chapter 7 automatically. If your income is above the median, you must pass a thorough means test that analyzes your disposable income after allowed expenses. It is important to note that those who do not pass the means test may still be eligible for Chapter 13 bankruptcy.

Credit Counseling Requirement

All individuals filing for bankruptcy in Texas must complete a credit counseling course from an approved provider within 180 days before filing. Upon completion, you will receive a certificate that must be filed with your bankruptcy petition. This requirement ensures that filers have explored all possible alternatives before proceeding with bankruptcy.

Residency Requirements

Texas has specific residency requirements for bankruptcy filers. You must have lived in Texas for at least 91 days before filing, and to use Texas exemptions, you must have lived in the state for 730 days (two years) before filing. These requirements help prevent bankruptcy forum shopping and ensure filers have established sufficient ties to the state.

Previous Bankruptcy Filings

The timing of previous bankruptcy filings can affect your eligibility. For Chapter 7, you must wait eight years from a previous Chapter 7 discharge or six years from a Chapter 13 discharge. For Chapter 13, you must wait four years from a previous Chapter 7 discharge or two years from a previous Chapter 13 discharge. These waiting periods are designed to prevent abuse of the bankruptcy system and ensure that filers use bankruptcy as a last resort rather than a recurring solution.

Additional Considerations

• Asset valuation: The value of your assets plays a significant role in determining which bankruptcy chapter is most appropriate for your situation.

• Debt limits: Chapter 13 bankruptcy has debt limits. As of 2024, the unsecured debt limit is $465,275, and the secured debt limit is $1,395,875. These limits are subject to change, so it is important to verify current figures.

• Employment status: While not a strict requirement, having a steady income is typically necessary for Chapter 13 bankruptcy, as it involves a repayment plan.

Work With a New Braunfels, TX Bankruptcy Lawyer

If you are considering bankruptcy, it is helpful to seek guidance from a San Antonio, TX bankruptcy attorney. Call the Law Offices of Chance M. McGhee at 210-342-3400 to schedule a free consultation and get started today.