Fort Worth Chapter 7 Bankruptcy Attorney

Assets Exempt from Liquidation

Chapter 7 bankruptcy does not mean you will lose everything. The bankruptcy court wants to leave you with resources. Certain property can be exempt. Federal and state laws outline what property can be safeguarded from liquidation. Some states opt out of the federal exemptions and use only their own. Texas allows debtors to use either the federal or state guidelines.

The Texas exemptions are generally more generous and used by most debtors:

• Homestead Exemption: Allows protection for up to $146,450. You can protect an unlimited amount of home equity if you have lived in the state for at least 40 months. Another stipulation is that the property doesn’t exceed 10 acres in an incorporated jurisdiction or 100 acres elsewhere.
• Motor Vehicle: Debtors with a valid driver’s license can protect the equity in a motor vehicle.
• Personal Property: You can protect up to $50,000 in personal property if you are single. A married couple filing for joint bankruptcy can exempt up to $100,000. This includes clothing, limited jewelry, furniture, household good, livestock, up to two firearms, and more.

In addition to the above exemptions, health savings accounts, retirement accounts, and pensions are also untouchable in bankruptcy proceedings.

Secured vs Unsecured Debt

There are two basic debt categories: unsecured and secured. Secured debt uses property as collateral to back a loan. Unsecured debt is not tied to collateral.

Examples of unsecured debt that might be discharged in Chapter 7 include the following:

• Credit Cards Balances
• Medical Bills
• Signature Loans
• Utility Bills
• Signature Loans
• Apartment Leases

Mortgages, home equity loans, and most car loans are examples of secured debt. Federal student loans generally fall into this category. Secured debt is not discharged through bankruptcy. Other debts that cannot be erased through bankruptcy include child support, alimony, certain taxes, and criminal fines.

Prioritizing the Debt

The trustee court appoints an unbiased trustee to oversee the process. The trustee sells nonexempt assets to maximize the potential return to pay the unsecured debt. Unsecured priority debt is paid first. Child support and personal injury claims against the debtor are paid first. Secured debts are paid next. Nonpriority, unsecured debt like credit cards are paid last.

If there aren’t enough funds from the liquidation to cover the nonpriority, unsecured debt, a percentage of those debts are paid, and the balance is discharged. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor.

Businesses Can File Under Chapter 7

Chapter 7 bankruptcy is the most-used chapter for individuals, but businesses can also file for liquidation under Chapter 7. Corporations, partnerships, and sole proprietorships that are organized as LLCs (limited liability companies) can use Chapter 7. This action is only appropriate in a small subset of situations. Since the business cannot use exemptions, the individuals typically file for personal bankruptcy instead of the business.

Don’t let your financial struggles continue to negatively impact your health, relationships, and financial well-being. Contact us today to discuss your bankruptcy options. Call (817) 497-8148 to schedule a consultation. We serve the counties of Tarrant, Parker, Johnson, Wise, Hood, Denton, Somervell, and Jack.