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PURPOSES OF
BANKRUPTCY
The United States Constitution provides a method whereby individuals, burdened by excessive debt, can obtain a "fresh start" and pursue productive lives unimpaired by past financial problems. It is an important alternative for persons strapped with more debt and stress than they can handle.
The federal bankruptcy laws were enacted to provide good, honest, hardworking debtors with a fresh start and to establish a ranking and equity among all the creditors clamoring for the debtor's limited resources.
Bankruptcy helps people avoid the kind of permanent discouragement that can prevent them from ever re-establishing themselves as hardworking members of society.
POWERS OF
BANKRUPTCY
Bankruptcy may make it possible for financially distressed individuals to:
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Discharge liability for most or all of their debts and get a fresh start. When the debt is discharged, the debtor has no further legal obligation to pay the debt.
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Stop foreclosure actions on their home and allow them an opportunity to catch up on missed payments.
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Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
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Stop wage garnishment and other debt collection harassment, and give the individual some breathing room.
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Lower the monthly payments and interest rates on debts, including secured debts such as car loans.
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Allow debtors an opportunity to challenge the claims of certain creditors who have committed fraud or who are otherwise seeking to collect more than they are legally entitled to.
LIMITATIONS OF
BANKRUPTCY
Bankruptcy, however, cannot cure every financial problem. It is usually not possible to:
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Eliminate certain rights of secured creditors. Although a debtor can force secured creditors to take payments over time in the bankruptcy process, a debtor generally cannot keep the collateral unless the debtor continues to pay the debt.
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Discharge types of debts singled out by the federal bankruptcy statutes for special treatment, such as child support, alimony, student loans, certain court ordered payments, criminal fines, and some taxes.
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Protect all cosigners on their debts. If relative or friend cosigned a loan which the debtor discharged in bankruptcy, the cosigner may still be obligated to repay whatever part of the loan not paid during the pendency of the bankruptcy case.
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Discharge debts that are incurred after bankruptcy has been filed.
CREDIT &
BANKRUPTCY
By federal law, a bankruptcy can remain part of a debtor's credit history for 10 years. Whether or not the debtor will be granted credit in the future is unpredictable, and probably depends, to a certain extent, on what good things the debtor does in the nature of keeping a job, saving money, making timely payments on secured debts, etc.
The section titles in this agreement are for convenience only and have no legal or contractual effect.
You must list all property and all debts upon filing for bankruptcy. All creditors receive notice of the bankruptcy filing and every credit card on which you owe money will be promptly deactivated and closed. Credit cards with no balance are not a debt and need not be listed in the bankruptcy, however typically even these cards are closed upon filing bankruptcy.
Credit card companies closely review and heavily scrutinize credit card purchases prior to bankruptcy. Anything that is out of the ordinary from regular activity like cash advances or large purchases will often be challenged as abusive or bad faith and your case may be dismissed if it appears you intentionally ran up bills prior to filing for bankruptcy. Do not run up credit card purchases prior to filing for bankruptcy.
CREDIT CARD DEBT
DEFENSE
Credit Card Lawsuits can plague your credit and prevent you from buying a home or a car in the future. We can help you resolve a credit card lawsuit easily by getting you a settlement or possibly defending you in the lawsuit. Often times these cases require a rigorous defense by a good lawyer so you can resolve the debt issues. Call our office for more details.
CHAPTER 7 BANKRUPTCY
Overview
Chapter 7 bankruptcy is a total liquidation of the bankruptcy estate.
In this type of bankruptcy, the Chapter 7 Trustee will gather up all non-exempt property owned by the debtor to pay the creditors that file a valid and timely proof of claim. The debtor is entitled to keep all exempt property. There are certain types of debt that cannot be discharged in bankruptcy, but for the most part, credit card debt, personal loans, and unsecured bills are discharged in a Chapter 7.
Assets
You may keep such exempt assets like your home or your car, however if either is subject to a lien, it is likely you will have to keep paying this debt to avoid repossession or foreclosure. Though a creditor cannot foreclose or repossess any property in an active bankruptcy, a creditor may ask the bankruptcy court to lift the automatic stay so that a repossession or foreclosure can continue. Alternatively, the debtor can reaffirm the debt (in a Reaffirmation Agreement) secured by the debtor’s home or car under either the same terms or newly negotiated terms.
Requirements
A debtor cannot have been dismissed from bankruptcy in the previous 180 days; and must either (1) have an income less than the median income of a household of your size in the state of Texas; or (2) must not have disposable income—income that can be used to pay unsecured creditors—in excess of $12,475 as it is calculated under the Means Test.
Time
A Chapter 7 bankruptcy takes approximately 3 to 6 months on average to complete and receive a discharge. A Chapter 7 remains on your credit report for up to 10 years, and will affect your access to credit for that time.
CHAPTER 13 BANKRUPTCY
Overview
A Chapter 13 is a reorganization of a debtor’s finances that allows them to pay back their creditors over a 3-5 year period based on their income and the size of their family. A debtor files for a Chapter 13 bankruptcy if the debtor has a regular source of income and has not filed a prior bankruptcy in the past 180 days. This type of bankruptcy allows a debtor to propose a plan to repay creditors back payments and restructure debt.
Assets
The debtor is entitled to keep exempt property, just as you can in a Chapter 7 bankruptcy. However, any property subject to a lien (like a mortgage or a car loan) will have to be paid either directly to the creditor under the original loan terms or thru the Chapter 13 plan, where the debtor can adjust monthly payments, pay back delinquent payments, and sometimes adjust the interest rates and other loan terms.
Requirements
Provided the debtor makes all plan payments, remains current on taxes, alimony, and child support payments, and there are no objections to a discharge, then the debtor will be discharged from the Chapter 13 bankruptcy at the end of the plan. The remaining unsecured debt at the end of the plan is discharged, and payments to secured creditors shall continue according to the plan terms
Time
The debtor proposes a Chapter 13 plan to repay debts with disposable income over a three- to five-year period. The Chapter 13 Trustee must review and ensure the plan conforms with the law. Provided no one objects to the plan, it is then confirmed by the bankruptcy court. The Trustee then disburses the funds under the plan to creditors, and monitors the debtor complies with all requirements of the bankruptcy.
FORECLOSURE
Overview
If the borrower misses a mortgage payment they will likely be assessed a late fee after a certain number of days. The amount of the late fee and when the fees will be assessed is outlined in the terms of the promissory note. These days, however, a lender usually doesn’t proceed with foreclosure until a borrower is 90 days past due.
Assets
A mortgage loan in the state of Texas typically requires a person to sign (1) a promissory note; and (2) a Deed of Trust.
Promissory Note: The borrower makes a promise to repay the loan according to the terms laid out in the promissory note.
Deed of Trust: The borrower gives the lender rights to collateral property if the borrower fails to repay the loan according to the terms of the promissory note. This secures the lender’s investment in the borrower.
Depending on your income and your financial circumstances, you can often times restructure or reaffirm debt so that you can retain the collateral that secures that debt.
Requirements
The mortgage servicer will likely send a default letter and/or call the borrower to make payment arrangements or offer loss mitigation options. The default letter is usually required under the deed of trust prior to an acceleration of the promissory note, which allows the lender to demand the balance on the note in full upon default, and foreclosure of the property.
After January 10, 2014, federal servicing rules prohibit notices of default or filings of foreclosure within the borrower’s first 120 days of delinquency. This allows you the time to seek out and apply for loss mitigation options offered to you to avoid foreclosure. In order to find out more information, contact the mortgage servicer and ask what loss mitigation options are available.
Time
A foreclosure can take anywhere between 2-4 months, but may take longer depending on delays.
After the 20-day cure period has expired, but at least 21 days prior to the foreclosure sale, a notice of sale must be sent to each of the borrowers obligated on the note, filed with the clerk and posted to the courthouse door in the county where the property sits. The notice of sale must include the date, time, and location of the foreclosure sale as well as a notice that any servicemembers should contact the lender to notify it of their military status.
COLLECTIONS
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A debt collection company attempting to collect debt in Texas must be bonded and licensed to do so. Failure to maintain an active surety bond is grounds for an immediate cessation of collections and reporting to major credit bureaus.
A debt collector must validate a debt within 30 calendar days when requested to do so.
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The debt collection agency must provide, among other things, specific information about the debt including proof that the debt has been legally transferred to them by the original creditor, the original balance, the date of original default, and the date of debt transfer.
Additionally, the debt collection agency must provide proof that you are, in fact, the debtor in question.
A collection company must prove, with a contract signed by the debtor, that they have the authority to collect fees, interest or expenses above the original balance.
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A debt collection company cannot, under any circumstances, engage in threats, coercion, harassment, abuse, unfair, unconscionable means, fraud, deception or misleading representations to collect debt. Texas law outlines over forty (40) credit collection agency actions that are against the law.
A debt collection company that is unable to meet any provisions of the debt validation process within 30 days is legally obligated to permanently cease collections and remove the derogatory listing from your personal credit profile with national credit reporting bureaus.
A third party collection agency that violates any provision of Texas Finance Code is subject to criminal penalties through the Texas Attorney General, as well as civil penalties that include monetary awards to the victim.