Your Frequently Asked Questions about Debt and Bankruptcy in Houston

Although you may feel very alone right now, you should take solace in the fact that we didn't just invent these questions—we hear them frequently from individuals just like yourself. Consumer debt is a nationwide problem and with a little legal guidance, you can be well on your way to living a fulfilling life.

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  • If my mortgage company withdrew acceleration of my loan, do they have to send another notice of intent to accelerate before they foreclose on my Texas home?

    Yes. In the Fifth Circuit case of Wilmington Trust, N.A. v. Rob (5th Cir. 2018), the court interpreted Texas law and held that once an acceleration of a mortgage loan is rescinded, the mortgage company must give another demand, i.e. another notice of intent to accelerate to the borrowers, prior to accelerating the loan and posting the property for foreclosure.

  • A court-appointed receiver took all my money from my bank accounts; is there any way to get it back?

    Maybe. Of course you can pay the full amount of the judgment or settle for some lesser amount, and negotiate the release of your money.

    But if you can't afford to do that, filing bankruptcy may be an option for you. If you file bankruptcy within 90 days of your money being seized, and you are able to claim the money as exempt property under state or federal law, you should be able to get your money back. In bankruptcy law it's called a preference or a preferential transfer. If this is your siuation, hire an experienced bankruptcy lawyer right away.

  • Can I go to jail for not paying my I.R.S. payroll taxes that I collect from my employees?

    Yes. 26 USC Sec. 6672 allows the government to assess a "trust fund recovery penalty" or TFRP against reponsible persons, for not paying over payroll taxes that they have collected from their employees. But another federal law, 26 USC Sec. 7202 makes is a federal felony to do so, and you can get a $10,000 fine and be sentenced to up to 5 years in federal prison. In short, don't do it, it is not worth it.

    If you already owe a large amount of unpaid payroll taxes and cannot pay it in full, contact our office or another experienced I.R.S. practitioner to represent you before the I.R.S. and either settle it or get you on a payment plan. Although payroll taxes or the TFRP cannot be discharged in bankruptcy, it is possible to propose a chapter 11 or chapter 13 plan to repay delinquent payroll taxes or trust fund recovery penalty over an extended period of time.

  • If I'm a Texan and I sell my Texas home after I file chapter 7 bankruptcy, do I get to keep the money?

    Yes. It was finally settled in the 5th Circuit court case of Matter of Deberry (2018). A Texan can sell their homestead, then file chapter 7 bankruptcy.  So long as they claim the home as exempt, and the exemptions are allowed (which is what usually happens), they can then sell their home, and do whatever they want with the sale proceeds.

    In other words, in this situation neither their creditors nor the bankruptcy trustee have any claim against the homestead sale proceeds. And the debtor does not have to reinvest the proceeds into another homestead within 6 months, as would usually be the case had they not filed bankruptcy.

  • My Houston, Texas bankruptcy judge is Hon. Jeffrey Norman. When was he appointed and for how long is his appointment?

    The Hon. Jeffrey P. Norman's appointment for a 14 year term as a Bankruptcy Judge for the Southern District of Texas, Houston Division begins April 2, 2018.  Judge Norman received his Bachelor of Science from Houston Baptist University in Accounting and Finance in 1982, and his Doctor of Jurisprudence from South Texas College of Law in 1985. Prior to his appointment to the Southern District of Texas Bankruptcy bench Judge Norman was a Bankruptcy Judge for the Western District of Louisiana, in the Shreveport and Monroe Divisions from 2014 to 2018.

  • My bankruptcy judge has been U.S. Bankruptcy Judge Karen K. Brown. Is she still my judge?

    Judge Brown will be retiring the end of March 2018 after 27 years as a U.S. bankruptcy judge in Houston, Texas. A new bankruptcy judge will be appointed to take over her court and her cases. 

  • Should you hire a "national" bankruptcy law firm off of the internet to file your bankruptcy?

    No. Big law firms practicing consumer bankruptcy law and finding their clients through the internet have gotten into serious trouble with the courts and the U.S. Department of Justice for unconscionable practices.

    It's better to hire a local bankruptcy law firm that is familiar with Texas law and is familiar with the local legal customs, bankruptcy judges and bankruptcy trustees.

  • Can court sanctions against an individual business owner be discharged in bankruptcy?

    Probably not.

    In a court case called Lee v. Ali, Houston U.S. Bankruptcy Judge Marvin Isgur held that the individual owner of a business could not discharge in his personal chapter 7 bankruptcy, post-judgment discovery sanctions imposed by the Harris County, Texas court. Lee v. Ali, Case No. 17-03231, U.S. Bankruptcy Court for the Southern District of Texas (2018).

  • I've had my wages garnished and I'm filing bankruptcy. Can I get my garnished wages back?

    Yes, you may be able to recover up to 90 days' worth of garnished wages back, if you file bankruptcy and you live in the "5th Circuit" which is comprised of Texas, Louisiana and Mississippi.

    There are certain conditions, such as you must be able to claim the wages as exempt, you will likely have to file an adversary proceeding or lawsuit in your bankruptcy case against your creditor, and other requirements. But it is possible and our firm has done it.

    For more information consult your bankruptcy attorney. The court case that they can read for more information is Tower Credit Inc. v. Schott (In re Jackson), 850 F3d 816 (5th Cir. March 13, 2017), cert denied.

  • If I claim federal exemptions in bankruptcy can I claim 100% interest in assets as exempt?

    Yes, says the 5th Circuit Court of Appeals, but only up to the "capped" values stated in 11 U.S.C. Sec. 522(d). See Peake v Ayobami (5th Cir. 2018).

  • If I am seriously delinquent on my I.R.S. taxes, can the I.R.S. revoke or deny my U.S. passport?


    Beginning January 1, 2018, Internal Revenue Code Section 7345 now authorizes the IRS to certify seriously delinquent tax debt to the U.S. State Department for action. The State Department generally will either revoke or will not issue a passport after receiving certification from the IRS that a taxpayer's taxes are "seriously delinquent," as defined in the law. 

    If you need help to resolve your IRS tax issues, please contact our office at 713-772-8037, or download our free Special Report: "I.R.S. Problems? 5 Ways to Get the I.R.S. Off Your Back!" available on this website or request one from our office. 

  • If my business files chapter 11 bankruptcy, must we pay quarterly fees to the court?

    Yes, there are quarterly fees that must be paid, not exactly to the court, but to the United States Trustee program for every quarter that your chapter 11 case is open. The fees are not too bad, they are based on how much money you disburse to your vendors and others during the bankruptcy case. 

    The U.S. Trustee's office is the "watchdog" of the bankruptcy system and the fees that they collect are intended to make the UST program self-supporting or at least defray the cost of the program. 

  • I owe more on my home than it is worth. If I file chapter 13 in Houston can I make my mortgage company accept it to satisfy the debt?

    Yes. The standard chapter 13 plan in the Southern District of Texas, including the Houston and Galveston divisions, was amended effective December 1, 2017. 

    One of the provisions allows chapter 13 debtors who no longer want property, to transfer it to their lienholders to satisfy debt, so long as the lienholders fail to timely elect to either foreclose on it or accept a deed to the property.

    This can be very helpful for people who are "stuck" with an "underwater" property and the mortgage company or other lienholder either doesn't want the property back, or just refuses to foreclose on it.

  • Does your failed Texas LLC or corporation need to file bankruptcy?

    Possibly not, unless there are significant assets to be sold off, or something that a bankruptcy trustee could pursue or recover for the benefit of creditors. Corporations and LLC's do not get a discharge of debts in chapter 7 bankruptcy.

    Only individuals, that is, real living people get a forgiveness of debt in chapter 7 bankruptcy, not entities like corporations or LLC's. If an entity files chapter 7 bankruptcy, the bankruptcy trustee will liquidate or sell the assets, then distribute the money to creditors according to a priority schedule set out in the Bankruptcy Code.

    Corporations and LLC's do receive a discharge of debts in chapter 11, but only after having had a reorganization plan approved, which the creditors can vote on, subject to being approved by the judge over the creditors' objections in certain cases. 

  • Does your law firm handle I.R.S. tax settlements?

    Yes. Especially if you owe a large amount of money to the I.R.S. (over $100,000), we would be happy to meet with you either in the office or by telephone to discuss your tax situation. We have resolved many serious tax problems for clients by using offers in compromise, installment agreements and bankruptcy.

    We can handle I.R.S. cases throughout the U.S., so even if you are not in the Houston, Texas area we are permitted to help you with your tax collection problems.

  • My chapter 13 payments fell behind because of Hurricane Harvey. Will the bankruptcy court give me any relief?

    Yes. If you are currently in chapter 13 bankruptcy in the Corpus Christi, Galveston, Houston, or Victoria areas and were impacted by Hurricane Harvey, the bankruptcy court has issued a Fourth General Order which may help you.  

    It gives chapter 13 trustees discretion to not file motions to dismiss for non-payment through November 1, 2017 in the Corpus Christi, Galveston, Houston, and Victoria Divisions. The bankruptcy court discourages motions to suspend or put a moratorium on payments, but if someone has gotten behind on payments during the period of August 28 through October 31, 2017, the court encourages the filing of motions to modify plans to catch up the delinquent payments. This could increase the amount of your plan payments.

    The court states that it will consider emergency motions to suspend wage orders, but debtors must maintain their chapter 13 payments if they are able to do so. 

    Finally, default provisions in agreed orders that require that debtors make all payments due to the chapter 13 trustee after the date of this order, are modified. If the failure to make a payment to the chapter 13 trustee is due to Hurricane Harvey's substantial and adverse effect on a debtor, missed payments for the period from August 28, 2017 through October 31, 2017 will be a default only if the Court determines that it is, after notice and hearing.

  • Is there help available for my mortgage after Hurricane Harvey?

    Probably. If your loan is owned or guaranteed by HUD, VA, Fannie Mae or Freddie Mac, you almost certainly can get some help from your mortgage lender. Call them or go to their website to review the help available. 

    Even if they are not on this list, call them and ask for help, assuming that you are in the disaster area. They may be able to offer you a forbearance, loan modification, or other help with your mortgage.

    If nothing else helps, and you are able to make your payments going forward, consider filing chapter 13 bankruptcy to catch up the delinquent payments. Contact our office at 713-772-8037 for your free consultation or to request more information.

  • If I receive an exempt worker's comp recovery after filing chapter 13, is it safe from my creditors?

    Maybe. But just claiming it as exempt is not enough.

    To keep a chapter 13 trustee from being entitled to the exempt asset, you must also be able to show that the recovery is "reasonably necessary for the maintenance and support of the debtors." If this happens in one of our cases, we have the debtors make a list of things that they need, like car repair, dental work, roof repairs, etc.

    If the asset is exempt and if the proposed use of the money is reasonable, we have not had any trouble with our chapter 13 trustees here in the Houston Division of the U.S. Bankruptcy Court for the Southern District of Texas. They generally will let the debtors keep the money and use it for the intended purpose.

  • After I file bankruptcy, is it safe to cash in my IRA that I have claimed exempt under Texas law?

    No, not until (at least) the bankruptcy is over and closed. If you cash it in and don't roll it over into another IRA within 60 days, it becomes "non-exempt" and may be taken from you to pay your creditors. See In re Hawk, 5th Cir. 2017.

  • Can I be sued in Texas for a consumer debt like a credit card in a county where I don't live?

    As a general rule, no. You must either be sued in the county where you live or the county where you entered into the contract.

    If you are sued in the wrong county, hire an attorney to file a motion to transfer venue to the proper county and/or dismiss the case. It may also be a violation of the federal Fair Debt Collection Practices Act and other consumer protection laws for someone to sue you in the wrong county.