Non-Exempt and Exempt Assets
Since bankruptcy is governed by federal laws, it is usually the same across all states. When filing bankruptcy, assets are classified into non-exempt and exempt assets.
Non-Exempt Assets: These are assets and properties that can be used or sold by the trustee in a Chapter 7 bankruptcy case. They include your second cars, vacation homes, second homes, bank accounts, stocks, bonds, family heirlooms, cash, and other investments.
Exempt Assets: These are properties that qualify for bankruptcy exemptions. They include your primary home, car, furniture pieces, household appliances, and clothing. You will still be left with your exempt assets in a Chapter 7 bankruptcy case.
What Does Chapter 7 Do?
Filing Chapter 7 bankruptcy helps individuals and businesses in the following ways:
- Clears away your general unsecured debts, such as unsecured personal loans, medical bills, and credit card debts.
- Alleviates you of many of your other financial obligations, excluding child support and spousal support payments. It can also help you rebuild your credit score gradually over time.
- Activates an "automatic stay" on your existing debts, which stops all creditor harassment and prevents debt collectors from collecting payments or garnishing your wages.
- Activates an "automatic stay" that stops collection agencies from evicting you from, repossessing, or foreclosing your home.
What Chapter 7 Doesn't Do
Chapter 7 won't do the following:
- It will not leave you destitute. You still get to hold on to your major assets, including your home, furniture pieces, clothing, and vehicles.
- It will not eliminate some debts, such as criminal restitution, fines and penalties, fraudulent debts, divorce settlement debts, state, local, and federal taxes.
- It will not alleviate your responsibility to pay child support and spousal support. A family court order will be required to suspend these.
- It will not eliminate your student loan debts, except in very rare situations.
Qualifying for Chapter 7 Bankruptcy in Texas
Qualifying for Chapter 7 bankruptcy in Texas requires you to pass the bankruptcy means test and attend credit counseling courses.
Bankruptcy Means Test
To qualify for Chapter 7 bankruptcy, your income must pass the bankruptcy "means test." If your income is less than the median income for your household size in Texas, you automatically pass. However, if your family income is above the state's median, in order to qualify for Chapter 7, you will need to complete the bankruptcy means test. The test will review your financial records, deduct certain expenses, and determine your disposable income. If your disposable income is too low to allow for the repayment of any outstanding debts then you may qualify for Chapter 7.
Those that don’t qualify for Chapter 7 bankruptcy may be better suited for Chapter 13.
Calculating Texas's Median Income
Qualifying for Chapter 7 bankruptcy also requires that your income is less than the Texas median income for your household size.
- One-person household – $50,902
- Two-member household – $66,899
- Three-member household – $73,948
- Four-member household – $86,259
*Add $9,000 for each household in excess of 4 members.
The figures listed are for 2020, but they're updated regularly. Our attorneys at Oliva Law Bankruptcy can help determine whether you qualify for filing Chapter 7.
Credit Counseling Providers
Before filing your bankruptcy case, you are required to complete a session with an approved credit counseling provider within six months prior to filing. After filing your bankruptcy case, but before the court issues your discharge, you also need to take a debtor management course from a U.S Trustee approved agency in Texas. Both courses usually take about two hours to complete, and you can attend online.
Work With an Experienced Chapter 7
Bankruptcy Attorney in McAllen, Texas
Filing for Chapter 7 bankruptcy is a common occurrence in Texas. According to the American Bankruptcy Institute, of the 35,069 bankruptcy filings in the state of Texas in 2019, nearly 17,829 were Chapter 7 cases. If you are considering filing for Chapter 7 bankruptcy, it is important that you speak with a knowledgeable Texas bankruptcy attorney for detailed guidance and to protect your rights.
Oliva Law Bankruptcy has been providing outstanding legal services and handling bankruptcy-related matters for over 15 years. Attorney Marcos Oliva and his experienced bankruptcy attorneys can review your unique situation, help you understand your available options, and determine whether or not, Chapter 7 is the right debt relief option for you. Our team will provide you with the comprehensive legal counsel and strong representation you need throughout your bankruptcy process.