Business & Finance Bankruptcy

Debt Elimination Laws in Texas

    Means Testing

    • Federal bankruptcy law determines whether you are eligible to claim bankruptcy. The law restricts Chapter 7 bankruptcy to include those who honestly have no way to pay their debts. If you make less than the state's median income, then you automatically qualify. If you make more than the median, it must be determined whether you make enough to satisfy some of your debt. In Texas, the median income for a one-earner family is $38,940.

    The Process

    • Bankruptcy proceedings start in bankruptcy court, where you file the petition to claim bankruptcy as well as a "Statement of Financial Affairs" that lists all your debt and the names and addresses of your creditors. Debts that are not listed will not be discharged, which means the debt will not be eliminated.

    "341 Meeting"

    • After the filing, the court holds a "341" meeting between you and your creditors. Creditors can question you if they like, but that is rare. They also have up to 60 days to convince the court that the debt should not be eliminated and that you should be obligated to pay something.

    What You Can Keep

    • In Texas, you have the choice of keeping possessions listed under federal exemptions or state exemptions. If you choose the Texas exemptions, you can keep your home, $30,000 of personal property, alimony, child support and more.

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