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.
Bankruptcy may make it possible for financially distressed individuals to:
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.
Stop foreclosure actions on their home and allow them an opportunity to catch up on missed payments.
Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
Stop wage garnishment and other debt collection harassment, and give the individual some breathing room.
Lower the monthly payments and interest rates on debts, including secured debts such as car loans.
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.
Bankruptcy, however, cannot cure every financial problem. It is usually not possible to:
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.
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.
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.
Discharge debts that are incurred after bankruptcy has been filed.
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.
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.
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.
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.