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 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.
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?
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).
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.
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 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).
Can a debtor's bad faith be "cause" for dismissal of a chapter 7 bankruptcy under Section 707(a) of the Bankruptcy Code?
The Fifth Circuit Court of Appeals has held that "bad faith" in the bankruptcy process can serve as the basis for a dismissal for cause under Section. 707(a) of the Bankruptcy Code, even if the bad faith conduct that the debtor engaged in could arguably be used to form the basis of an objection to discharge, or objection to the dischargeability of a debt, or something else. And the bad faith conduct can be either before or during the bankruptcy case. Matter of Krueger, 5th Cir. 2016
If I cash out my I.R.A. before bankruptcy and put the money in a business account to keep it from being seized, can I lose my bankruptcy discharge?
In a recent bankruptcy court case from Houston, the Debtor (before filing bankruptcy) had a personal bank account seized by a judgment-creditor. To avoid that, he and his wife cashed in some I.R.A.'s and put them in a business bank account, with the expressed purpose of keeping that money from being seized.
After the Debtor filed chapter 7 bankruptcy, a creditor objected to his discharge. After a trial, the bankruptcy court denied his discharge, finding that even through his pre-petition transfer was exempt funds (the I.R.A.'s), since it was done with fraudulent intent, it violated 11 USC Sec. 727(a)(2) and was cause to not discharge any of the Debtor's debts.
Can they revoke my chapter 7 bankruptcy discharge if I don't list all of my property?
If you intentionally fail to list all of your property in your chapter 7 bankruptcy case, you can have your discharge revoked for fraud pursuant to 11 U.S.C. Section 727(d). See In re Chapman, Adversary No. 14-3201, U.S. Bankruptcy Court, SD Texas 2015.
You can also be criminally prosecuted under Title 18, United States Code.
Is it safe to take out my I.R.A. money during my bankruptcy if I chose Texas exemptions?
According to a court case dated Jan. 30, 2015 called In re Hawk, if you claimed your I.R.A. exempt under Texas law, and take it out during your bankruptcy and do not reinvest it into a "rollover IRA" within 60 days, it is no longer exempt and the trustee can take it.
Only way for it to be safe is to wait until the case is not only discharged, but closed and the court has issued your "Final Decree." Then you are safe it using your IRA for whatever you wish.
How much does it cost to file bankruptcy in Texas?
Chapter 7 Cases. If you qualify to file chapter 7 bankruptcy, the bankruptcy court's filing fee for a chapter 7 is now $335.00. Additionally, there may be other costs and your attorney may charge you anywhere from $1000-$1500-$2000 or more depending upon the facts of your case. It's really not possible for our firm to quote you a fee until you come into the office and let us find out more about you and your property, your debts, and your income and expenses. You may not even qualify to file chapter 7.
Chapter 13 Cases. The filing fee for a chapter 13 bankruptcy is currently $310.00. Here in the Southern District of Texas, we have a court-approved "fixed fee" of $3500 for consumer cases and $4500 if your case involves a business. Or your attorney may charge you based upon an hourly rate, it is between you and your attorney.
Assuming that you qualify for chapter 13, and there is a payroll deduction or "wage order" that deducts the required plan payments from your paycheck, we can usually start your chapter 13 case (that does not involve a business) for a small down payment (as little as $390 or $432 for a couple) and be paid the remaining fees through the chapter 13 plan.
Do you even need to file bankruptcy? Sometimes people consult with us, and we explain to them that in their situation, they don't need to file bankruptcy. Sometimes their debts are too old, or for other reason they simply don't have to file. We will be honest with you and tell you the truth; we don't want you to file bankruptcy unless it is really necessary. Call us at 713-772-8037 anytime for your free consultation, or to request one of our publications.
Can I sue my mortgage company for sending me bills after my mortgage loan is discharged in bankruptcy?
According to one of our Houston bankruptcy courts, yes.
In a recent court decision by U.S. Bankruptcy Judge Marvin Isgur sitting in Houston, the court held that a mortgage company cannot send you monthly mortgage statements requesting money, if the mortgage loan was discharged in bankruptcy. If they do, it is a violation of the discharge injunction of 11 U.S.C. Section 524. The court case is Hernanez v. Caliber Home Loans, Adv. Pro. No. 14-03213, U.S. Bankruptcy Court, SD Texas 2014.
Mortgages are typically discharged in chapter 7 bankruptcy, if there is no Reaffirmation Agreement entered into with the debtors during the chapter 7 case. According to this court decision, mortgage companies will have to be very careful about trying to collect mortgage loans after bankruptcy, or risk getting sued for violation the Bankruptcy Court's discharge injunction.
If I file bankruptcy does that get rid of judgments that are already filed against my Texas homestead?
Yes, but the best practice is to file a "motion to avoid judgment lien" during your bankruptcy.
If you have an "abstract of judgment" recorded in your county and you own a home in that county, and the judgment is for a debt that will be discharged or cancelled in the bankruptcy, it qualifies to be "avoided" or cancelled during the bankruptcy, if a timely motion is filed.
But be sure your lawyer files a "motion to avoid judgment lien" during the bankruptcy. There are other ways to get rid of it but the simplest and quickest is to a file a motion.
A recent Memorandum Opinion by U.S. Bankruptcy Judge Letitia Z. Paul explains the laws involved in such a motion. In re Brown, U.S. Bankruptcy Court, SD Texas 2014.
I need to sell my Texas homestead, but I also need to file chapter 7. Will I lose my equity to the bankruptcy court?
It's possible if you are not careful.
If you have a lot of equity in your home such that you have to choose the exemptions under Texas law to keep it, you may not want to sell your home until your chapter 7 bankruptcy case is not only discharged but closed. A Houston bankruptcy judge ruled that under Texas law, if you sell your home during a chapter 7 and don't reinvest the proceeds into another home within 6 months, the chapter 7 bankruptcy trustee can take the money.
If this is your situation, call our office and make an appointment to discuss your situation. It may take some "strategizing" but I'm sure we can find a way to deal with the problem. Your home in Texas is safe from creditors, it's just that if you sell your home, and your bankruptcy is not yet over and closed, the proceeds must be put into another home, or you could lose them.I
I inherited a $100,000 IRA from my mother. Will it be taken away from me if I file bankruptcy in Texas?
If you are able to claim Texas exemptions, then yes, you should be able to claim your inherited IRA as exempt under Texas law. Section 42.0021 of the Texas Property Code permits you to claim inherited IRA's as exempt.
But the U.S. Supreme Court ruled in Clark v Rameker that inherited IRA's cannot be claimed as exempt under federal law in bankruptcy. So if you choose the wrong exemptions, then yes it is possible in Texas to lose an inherited IRA to your bankruptcy trustee who could then liquidate it and use the money to pay your unsecured creditors.
So if you have to file chapter 7 bankruptcy in Texas and you have an inherited IRA, be sure to hire an experienced, expert bankruptcy lawyer to be sure that your property is properly claimed as exempt and protected.
I own my Texas home in a rural area, and it is in 3 different tracts or parcels. Can I claim it exempt or safe from creditors in chapter 7?
Yes, up to 100 acres for a single person and 200 acres for a family, are exempt from creditors in a rural area, provided that the property is actually used for homestead purposes. It can even be in different parcels or tracts of land.
In a recent court case, a Houston bankruptcy judge ruled that a couple's entire 34 acres was exempt, and safe from being seized by creditors. But be sure your property qualifies; hire an expert bankruptcy lawyer.
Where can I go to purchase distressed assets from bankruptcy trustees?
If you are a bankruptcy trustee wanting to sell assets, or a potential buyer looking for distressed assets to purchase, a new website set up by the National Association of Bankruptcy Trustees (NABT) may be of interest to you.
The website is www.marketassetsforsale.com, and it offers or soon will be offering assets for sale from all types of distressed asset sales, including bankruptcy sales, receiverships, assignments for the benefit of creditors, bank-owned assets and asset forfeitures.
You must create an account to gain access to the site, and there is a subscription fee if you are not an NABT member, but if buying or selling distressed assets is what you are interested in, this may be a website that you will want to mark as one of your favorites.
Can I take out a payday loan to pay my bankruptcy lawyer's fees to file my bankruptcy?
I suppose you can borrow from a payday loan lender to pay our attorney fees, but please don't.
It would be fraudulent for you to borrow money that you don't intend to repay. And if you make a false or misleading written statement to obtain credit, it may also constitute a criminal act in violation of Sec. 32.32 of the Texas Penal Code for you to borrow the money from a payday lender to pay our legal fees.
When you come into our Houston law office and consult with us about bankruptcy, we give you a lot of information, including a list of legal ways to raise the money to pay us.
As much as we want to help you, and even though you may get away with it, please don't incur debt to pay us that you don't intend to repay. On top of everything else, it's just not right.
What does it cost to file chapter 7 bankruptcy in Houston Texas?
It's frustrating when people call the office and ask "how much do you charge for a bankruptcy?" First of all, we don't know if they will even qualify to file bankruptcy, or if it's the best option for them.
Also, is it chapter 7 or 13? And, how complicated is it? Is there a business involved? It's kind of like calling a car dealership and asking "how much does a car cost?" It just depends.
Our law office charges attorney fees for the simplest Chapter 7 cases starting at $1000, plus costs including the filing fee which total $461 for a single person, $503 for a couple. This includes everything, including the court's filing fee, the required credit briefing and debtor education courses, all of your credit reports, and other costs.
A typical Chapter 7 case may be $1500 or more plus costs, depending upon the number of creditors, the amount of debt, whether or not there is a business involved, what motions or extra actions are going to be necessary during the case, and other factors.
You can pay our fees for Chapter 7 out over time, and just pay a small down payment for us to open a file for you. Once the entire fee is paid, we prepare the documents necessary to start your case, and you come into the office for a "signing" appointment, that generally takes about two hours.
Don't make the mistake of shopping for attorneys only on price. Filing a bankruptcy is a serious, federal legal proceeding. We do not recommend that you go to court with the "lowest bidder."
Attorneys are not all the same. Our firm's fees are very reasonable. If another firm quotes you fees that are much lower than ours, I wonder how much time if any you will spend with an attorney, or what is actually included in the fee. Bear in mind that if your bankruptcy case is mis-handled, you could lose property or even lose your right to a discharge in bankruptcy.
Our firm enjoys an excellent reputation, and we do a good job for our clients. We also perform a "credit clean-up" for you following the bankruptcy at no additional charge, that can help your credit reports recover more quickly. And we stick with you and answer any of your questions about your case, even years after the case is over.
Call our office at 713-772-8037 for a free first consultation, and once we consult with you, we will give you a written fee agreement with a firm fee quote.
I fell ill and had to go in the hospital, with no insurance. Are doctor & hospital bills discharged in bankruptcy?
As a general rule, yes.
I talk to a lot of people here at my Houston law office that seem surprised that hospital and medical bills can be discharged in bankruptcy.
Medical-related debts are "general unsecured" debts and are usually discharged without payment in chapter 7, or paid whatever amount the general unsecured class is being paid in a chapter 13 case, which is often little or nothing.
Keep in mind that if you are ordered to reimburse an ex-spouse for medical bills through a divorce decree or other order of a court, you may have to pay this kind of debt, or be held in contempt of court. Medical bills in such a case could be held to be "in the nature of child support," and not discharged by bankruptcy. 11 U.S.C. Sec. 523(a)(5).
Also, if you have a particular doctor that you are seeing and want to continue to see that doctor, even though you file bankruptcy on his bill, the doctor can refuse to treat you unless you pay it or agree to make payments on it.
If you file bankruptcy, you must list all of your debts so in such a situation you may want to contact the doctor's office and let them know that you will be paying it. You can voluntarily pay any debt that you want after a bankruptcy discharge. 11 U.S.C. Sec. 524(f).
Timing can also be important in medical bankruptcies. If you have a major surgery or major procedure coming up that you may incur a lot of medical debt on, you may want to wait until after it is over, to be sure that you can include the bills from the event.
Once the bankruptcy is filed, it may not be possible to include "after-acquired" debt in the bankruptcy. There are strategies to deal with that too, but come see us at our Houston-area law office to discuss these issues, if you are facing them.