Federal law governs bankruptcy in every state, so the process is the same. The two main types of personal bankruptcy are Chapter 7 and Chapter 13. Chapter 7 is also known as straight bankruptcy or liquidation. The court discharges or erases your debts after liquidating your assets to pay your creditors as much as possible. Chapter 13 requires that you file a plan with the court to pay down your debts over a period of time. You might repay all or a portion of your debts, depending on variables such as your earnings, debt types and the amount of property you own.
Where To File
Texas has four districts for U.S. bankruptcy courts. You're eligible to file in Texas if you've lived in the state for most of the last 180 days. Visit the U.S. Trustee's website to determine where in Texas you should file, depending on where you reside.
- Northern District: These bankruptcy offices are located in Abilene, Amarillo, Dallas, Fort Worth, Lubbock, San Angelo and Wichita Falls.
- Southern District: These bankruptcy offices are located in Brownsville, Houston, Victoria, Corpus Christi, Laredo, Galveston and McAllen.
- Eastern District: These bankruptcy offices are located in Tyler, Plano and Beaumont. Offices in Lufkin, Texarkana and Sherman hold court, but they're not actually offices of the bankruptcy court.
- Western District: These bankruptcy offices are located in Austin, El Paso, San Antonio, Waco and Midland.
Are You Eligible to File Chapter 7?
If your average monthly income is less than Texas' median income, you're eligible to file Chapter 7. If your average monthly income is equal to or greater than Texas' median income, you're not eligible unless you pass a stringent means test.
Length of Chapter 13 Plans
If your average monthly income is less than Texas' median income, you can repay your creditors over 36 months. Otherwise, you may have 60 months.
Exemptions are property that may be excluded from liquidation. In Texas, you can use either the state's set of exemptions or federal bankruptcy exemptions, but you can't select exemptions from both lists. Some exemptions include:
Homestead: Unlimited amount, but not to exceed 10 acres in a city, town, or village, or 100 acres elsewhere. up to 200 acres are exempt for family. Proceeds from the sale of property are exempt for six months after the sale date.
Wages: Earned unpaid wages and unpaid commissions for personal services up to 25% of the total limit
Other Property: Furniture for the home, family heirlooms, food, clothing and jewelry to 25% of the total exemption limit, two firearms, athletic equipment, one motor vehicle for each adult with a driver's license or who relies on another to operate the vehicle, two horses, mules or donkeys, a saddle, blanket and bridle for each, 12 head cattle, 60 head other livestock, 120 fowl, food for the animals, and pets. The total of all items, including tools of trade and the cash value of life insurance, cannot exceed $30,000 or $60,000 for the head of the family.
Pensions: IRAs, Keoghs, nontaxable retirement accounts, pensions for police, firefighters, teachers, state workers, judges, and county and district employees
Compensations and Public Benefits: Unemployment compensation, workers' compensation, crime victims' compensation, public assistance and disability benefits, and medical assistance.
Tools of the Trade: Tools, books, and equipment including motor vehicles and boats used in your profession, as well as farming or ranching vehicles and tools. Tools of trade exemptions are included in the total limit listed under personal property exemptions.
Insurance: State employee uniform group insurance, public school group insurance, state college employee benefits, fraternal society benefits, life, health, accident or annuity benefits, and the proceeds of such policies.
Miscellaneous.: Alimony and child support, college savings plan trust accounts, liquor permits, licenses and prepaid tuition plans
If you haven't lived in Texas for two years or more, you may have to use the exemptions from your previous state.
This article offers a brief, general introduction to the topic. For more detailed, specific information, please contact a Texas bankruptcy lawyer.