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 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.

  • Is it an FDCPA violation for a debt buyer to file a proof of claim for a time-barred debt in a bankruptcy case?

    No. The U.S. Supreme Court ruled in Midland Funding v Johnson (U.S. 2017) that it is not a violation of the Fair Debt Collection Practices Act (FDCPA) for a debt buyer to file a proof of claim for a "stale" or too-old to be enforceable debt in a a bankruptcy case.

    The debtor still has the right to file an objection to claim to seek to have the bankruptcy court disallow the stale claims, but it is permissible for the debt buyers or creditors to file them.

  • Should I wait to file my bankruptcy in Houston, Texas?

    No. In most cases, waiting to file bankruptcy, without a legitimate reason, can backfire on you.

    It's natural for people to put off unpleasant things like filing bankruptcy. But if you know that you need to do it, don't wait. Get it over with. Why should you not wait? Several reasons:

    1. You may start making more money and no longer qualify to file chapter 7 bankruptcy if you wait to file bankruptcy.

    2. A creditor may sue you, get a judgment and seize your money or property if you wait to file bankruptcy.

    3. You could lose your home to foreclosure or your car or truck to repossession if you wait to file bankruptcy.

    4. One or more of your creditors could decide to declare the debt uncollectible and send a 1099-C Cancellation of Debt form to the IRS so you may owe income taxes on the amount forgiven if you wait to file bankruptcy.

    5. Finally, if you wait to file bankruptcy you are just putting off the day that you are debt-free, and can re-establish your credit and get on with your life.

  • I had to leave the military early, now they are trying to get my reenlistment bonus back from me. Can I discharge that debt in bankruptcy?

    Not for five years. They have five years to try to collect the debt for a military reenlistment bonus from you. Other military pay such as incentive or special pay, the same rules apply.

    Federal law says that this kind of debt is not dischargeable in bankruptcy for 5 years after the term of the contract or agreement ends, or 5 years after the term of service on which the debt is based. 37 U.S.C. Sec. 303a

  • Can I file a joint bankruptcy case with my common-law spouse and just pay one bankruptcy lawyer fee and one filing fee?

    Yes.

    In Texas a "common law" or informal marriage can be just as valid as a regular formal, ceremonial marrage. It is even "codified" or made into a Texas law as Section 2.401 of the Texas Family Code, Proof of Informal Marriage. 

    So it is permissible to file a joint bankruptcy case with your common law spouse and save money over filing two separate bankruptcy cases, so long as you have an agreement to be married, you hold yourself out to others as married, and you are living together or have lived together. As an alternative, you can sign and file a "Declaration of Informal Marriage" as provided by the Family Code.

  • I owe the IRS a lot of money! Do they charge me a fee to enter into a payment plan with them?

    Yes. The I.R.S. charges a "user fee" to set up an Installment Agreement or payment plan with them. As of January 1, 2017 the user fee increased to $225. If you set up a Direct Debit Installment Agreement, where the payments are deducted from your bank account, the fee is "only" $107.

    If you default on an Installment Agreement and are later able to reinstate it, the fee is $89. But if you can show that your income is low, i.e. less than 250% of the Department of Health and Human Services poverty guidelines, your fee is only $43.

    If you owe the I.R.S. over $10,000 and you need help to resolve your taxes, contact our office. We help clients resolve their tax collection issues with their I.R.S. 

  • If I transfer property to a friend or relative to keep it out of bankruptcy, how long do I have to wait so it is safe from seizure?

    Possibly up to ten (10) years, at least if you also owe an unsecured debt to the I.R.S.

    Court cases are holding that a bankruptcy trustee can "step into the shoes" of the I.R.S. in such a case, and use the 10 year I.R.S. statute of limitation to extend the normal state statute of limitation that would otherwise apply (4 years in Texas, for example). In re Kipnis, US Bankruptcy Court, SD Fla 2016.

  • I'm in chapter 13. My mortgage company filed a notice for fees incurred more than 180 days before they filed the notice. Are they allowed to do that?

    No. You should ask your attorney to file an objection with the Bankruptcy Court.

    In a chapter 13 bankruptcy case, under Bankruptcy Rule 3002.1, post-petition mortgage fees, expenses or charges are allowed to be paid to mortgage lenders only if they file a notice with the bankrupt court within 180 days of when the particular expense is "incurred." In a recent case from the Southern District of Texas, a debtor objected because some of the fees were incurred before 180 days before the notice was filed. They were invoiced to the mortgage company within the 180 days, but they had been incurred before that.

    U.S. Bankruptcy Judge Eduardo Rodriguez held that a mortgage "fee, expense or charge is incurred when there is first a legal obligation to pay the debt, not when an invoice is issued." In re Raygoza, (Bankr. S.D. Texas 2016).

  • I'm a contractor and when I could not complete a project, I got sued under Texas Construction Trust Fund Act. Are there any defenses?

    Yes.

    You may be able to use the affirmative defense that all the trust fund money was used to pay overhead expenses. See Texas Property Code Sec. 162.031(b) and TAG Investments, Ltd v. Monaco, 5th Cir. 2016.

  • Can my Texas car or truck registration be denied if I owe delinquent child support?

    Yes. The Texas Office of the Attorney General (OAG) will deny vehicle registrations for those child support obligors that are more than 180 days delinquent, starting in 2016. This is only for child support cases being handled by the OAG.

    To avoid denial of your car or truck registrations, the OAG has a dedicated phone line for all denial of motor vehicle registration renewal issues. Parents can call (866) 646-5611 to make payment arrangements.

    Or if you also have other serious debt issues, you may want to consider filing chapter 13 bankruptcy, and repaying the delinquent child support over a 3- to 5-year chapter 13 plan. If you live in the Houston, Texas metropolitan area or surrounding counties, call our office at 713-772-8037 for your complimentary consultation.

  • Can I complain to the Department of Education if a federal student loan debt collector is harassing me or lying to me?

    Yes. You can file a complaint with Federal Student Aid, an office of the Department of Education. It may or may not solve your problem, but at least it will make them aware of it.

    You also have rights under federal and state law to sue a debt collector under certain circumstances. If you feel your rights have been violated, consider consulting a lawyer about your rights under the federal Fair Debt Collection Practices Act (FDCPA) and similar laws. 

  • Can a bankruptcy trustee take my I.R.A. money if I take a lump sum out during my bankruptcy?

    Yes, in certain circumstances. If you have claimed the I.R.A. as exempt under Texas law, and you take out a lump sum during a bankruptcy, and you do not reinvest it in another I.R.A. (a nontaxable rollover) within 60 days, then the money is no longer considered an I.R.A. and it may be seized by your bankruptcy trustee.

    Recommendation: Don't take a lump sum distribution from your I.R.A. during a bankruptcy if you have claimed the funds as exempt under Texas law, unless you are doing a nontaxable rollover to another qualified plan. Check with your lawyer first. The safe bet is to wait until the bankruptcy case is not only discharged but closed (final decree has been issed by the court).