Guidelines for Filing Bankruptcy in Texas
- Before you file a bankruptcy petition in Texas, you must choose the type of bankruptcy you want to file. The vast bulk of consumer bankruptcies fall under one of two bankruptcy chapters: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, a bankruptcy trustee liquidates assets for the benefit of your creditors, subject to certain exemptions. Chapter 13 bankruptcy is for debtors with regular income who can afford to make payments to creditors in exchange for protection for all assets.
- To protect property in a Chapter 7 proceeding, you must list all of your assets on your bankruptcy petition along with a correct citation of the applicable Texas law exempting your property from liquidation. One of the noteworthy characteristics of Texas bankruptcy exemptions is an unlimited homestead exemption, protecting your home from liquidation regardless of its value. Other categories of Texas exemptions include personal property, tools of trade and pensions.
- In order to qualify for a Chapter 7 bankruptcy in Texas, you must take and pass the means test as outlined by the U.S. Trustee Program. The means test compares your annual income with the Texas median income for a family of your size. If it is over the median, you are allowed to factor in various expenses to determine if you have any disposable monthly income. Essentially, the means test pushes debtors with higher incomes into a Chapter 13 repayment plan rather than allowing them to file Chapter 7.
- Texas is located in the 5th Bankruptcy District and consists of four separate bankruptcy courts: Eastern, Western, Northern and Southern. In addition to federal bankruptcy procedures, you must obey any local rules variations among the district courts. For example, in the Northern Texas Bankruptcy District, in addition to submitting the paper form of your creditor mailing matrix, as is standard in most courts, you must include a .PDF and .TXT version on CD, 3.5" diskette or flash drive.
