Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is commonly referred to as “liquidation” or the “wipe-out” kind of bankruptcy.

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Although it’s called “liquidation” it is actually pretty rare, with proper planning, for Chapter 7 debtors in Texas to actually have property taken from them. This is because of Texas’ liberal exemption laws (For more information regarding Texas Exemptions, please see the following pages from the Texas State Constitution and Statutes Chapter 41 Exemption: Interests in Land and Chapter 42 Exemption: Personal Property). Remember that it’s the job of your attorney to help you determine if any property is at risk when you do a chapter 7.

You also have the option of using federal exemptions if they are more favorable to your situation.  For more information on the federal exemptions, please come in to meet with us or review 11 U.S.C. 522 – Exemptions.

A Chapter 7 Bankruptcy filing is most commonly used to wipe out unsecured debts such as most credit cards, medical bills, repossession deficiencies, etc. In most instances, after proper planning and drafting, clients go through the process of Chapter 7 bankruptcy keeping their property and ending the obligation to pay overwhelming debt.

– Can I keep some of my assets or debts out of the filing?

No. The bankruptcy code requires that you list everything you own and everyone to whom you owe money. Certain debts you may choose to keep and continue to pay for, like a house or a vehicle.

– What happens if I don’t list a debt?

Under the strict letter of the law, that particular debt will not be wiped out. In practice, as long as certain circumstances are met, the debt IS wiped out, but it will create unnecessary legal fees for you. If you intentionally leave off a creditor, you commit perjury. It is therefore incredibly important that you give us a list of all of your debts.

– Does liquidation mean you lose everything?

Not at all! Less than 1% of my clients lose property. Your home can have unlimited value as long as it is on 10 acres or less inside the city limits or 200 acres or less in a rural area. You can have 1 vehicle per licensed driver in a household. A married couple can have up to $60,000 worth of personal belongings. It’s my job to help you determine whether your property is protected, so give me a call and make an appointment, and I’ll help you figure this out.

– How long does the process take?

The average Chapter 7 takes about 6 months from date of filing to completion. 

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