Of course, it is not just happening in Texas. Men and women in households around this country are facing difficult financial decisions in light of our current economy. The questions being raised around the dinner table can range from how to scale back the summer vacation plans and who is going to be responsible for clipping coupons this week to which bills can go unpaid until next month and how to let your youngest child know that the plans to attend her dream college needs to be put on hold. What are the options available to an individual or a family that needs to see some improvement in their financial standing or else face dire consequences? In an effort to avoid a home foreclosure, many people try to sell their homes and look for a new place to live with a lower rent or mortgage payment. But, with today’s housing market, properties can have “For Sale” signs planted in their front yards for months before an interested buyer is found. More and more debtors are turning to debt consolidation services, which promise on those daytime and late-night television ads to lower your monthly payments into one manageable fee. However, what if your situation is so desperate that these options will not be enough to ease your burden? As Texan debtors and others throughout the United States are deciding, filing for bankruptcy protection may be the best option in these troubling economic times.
The recent numbers concerning bankruptcy in our state show what is increasingly becoming a harsh reality for our fellow Texans, particularly in Austin, Houston and San Antonio. Just in the first few months of 2009, court records indicate that approximately 2,672 bankruptcy cases have been filed in Houston. This number shows a 6.2% increase over the 2,515 cases that were filed during the same time period last year. [1] The jump in filings in some of our other major cities is even more startling. In San Antonio, the bankruptcy filings for the first three months of 2009 totaled 1,127, which is a 22.5% increase from the 920 such filings, which occurred between January and March of 2008. [2] And, the numbers indicate that those living in our state capitol in Austin are also trying to relieve themselves of some of their overwhelming financial burdens. Bankruptcy filings of all types in the Austin area totaled just over 800 in the first quarter of 2009, which is up 25% from the same period last year. [3] Despite data that shows more Texans are struggling to maintain their personal financial standing, our state is still faring better that most others in the country. Last year, Texas ranked forty-sixth in the nation in bankruptcies, even better than our 2007 ranking which placed us at number thirty-nine. [4] Of course, this relatively good news does nothing to lessen the pain of each individual who is facing bankruptcy.
For those who are considering the option of declaring bankruptcy, you should be aware of the state and federal laws that affect such filings in Texas. There are two options available to individuals-Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 Bankruptcy Protection
Chapter 7, the most common approach, is considered straightforward liquidation bankruptcy in which your non-exempt assets are handed over to a trustee appointed by the court and then converted into cash to pay your creditors. In reality, most people who file Ch. 7 have no non-exempt assets to sell and the Ch 7 bankruptcy filing essentially becomes a fresh start for their finances. [5] The federal bankruptcy laws in Texas have deemed it so you can determine if you want to use the federal exemption statutes or the Texas statutes when cataloging the assets that creditors are not allowed to touch. With Texas having the most generous list in the country concerning what debtors may keep, most bankruptcy filers choose to follow the Texas guidelines. [6] You are eligible for Ch 7 bankruptcy if your income is below that of the median family income in Texas, as determined by U.S. Census Bureau statistics. If your income is higher than this determined amount, the court can look at your income over the past six months as well as your current expenses to decide if you qualify.
Chapter 13 Bankruptcy Protection
If the bankruptcy court determines that your financial standing makes you ineligible for a Ch 7 filing, then Ch 13 may be the most appropriate action for you. Under this system, known as debt reorganization bankruptcy, debtors develop a payment plan that will repay creditors over a period of three to five years. Ch 13 may be the preferred filing method for those who have some non-exempt assets that they wish to retain even after declaring bankruptcy or for people who have debts such as taxes or student loans that cannot be wiped clean through a Chapter 7 bankruptcy.
Bankruptcy versus Debt Consolidation
While a Chapter 13 filing may be seen as similar to working with a debt consolidation service, as both set up regular payments with the intention of bringing you current with your creditors, individuals looking for financial relief should know there are differences in the two options. With Chapter 13, you get the assurance of a court-appointed trustee (who may or may not be lawyers) who works with you to make sure that payments are appropriate and processed correctly. On the other hand, some private companies may be scams out to make a profit by charging exorbitant fees and they may not even result in the credit relief you desire. [7] Such contracts should only be signed after completing extensive research on the company and reading the experiences that others have had.
Conclusion
Filing bankruptcy may seem like a wonderful solution to a financial crisis that has been draining you for years and this is true in many cases. However, you must remember that when you hire an attorney and declare bankruptcy you are affecting your assets, your credit score, and creating a record that is available to the public. It is essential that you have an effective and thorough bankruptcy lawyer who will be by your side as you navigate through the bankruptcy courtroom proceedings and the cumbersome paperwork. Mistakes can result in losing assets that you consider essential to protect. And, if you fail to report some of your assets, federal criminal charges may result. [8] Why take any chances with your money, your treasured belongings, and even your future? If Chapter 7 or Chapter 13 may be in your near future, please make a phone call to an experienced bankruptcy attorney your first step.
[1] Taylor, Frank, “Economic Downturn: Bankruptcy Filings are on the Rise in Houston,” Examiner.com, April 20, 2009.
[2] Tuttle, Donna, “Bankruptcy Filings Stacking Up in San Antonio,” San Antonio Business Journal, https://www.bizjournals.com/sanantonio/stories/2009/04/13/daily4.html, April 13, 2009.
[3] Kwon, Jean, “Austin’s Bankruptcy Court Starting to See Signs of the Recession,” Austin Business Journal, https://www.bizjournals.com/austin/stories/2009/04/13/story5.html, April 10, 2009.
[4] “Bankruptcies Surge in 2008, Passing 1 Million Mark Again,” CreditCards.com, January 23, 2009.
[5] “Bankruptcy in Texas,” Lawyers.com, https://legal-info.lawyers.com/research/, 2009.
[6] Calkins, Laurel Brubaker, “Deadbeat Homeowners Tap Texas Bankruptcy Laws to Duck Creditors,” Bloomberg News, November 18, 2008.
[7] Herring, Cornie, “How to Identify the Debt Consolidation Scams,” Unarchived Articles, December 21, 2006.
[8] “Why Hire a Bankruptcy Lawyer?” BetterBankruptcy.com, 2008.
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