Over the course of Texas’ long and proud history, the residents of our State have always valued self reliance as an ethos to be treasured above all others, and Texas residents have been taught to resist Chapter 7 bankruptcy protection or any assistance garnered from the federal government up until there was absolutely no other choice available for their family. Nonetheless, in the modern banking era when credit first started to become so freely available, Texans regardless of age or income or payment history ended up taking on consumer debts just in order to see their families through the rougher patches that inevitably come about in even the strongest of homes. When interest rates were low and barriers to investment were small, it was only natural that many Texas heads of household would leverage the good credit they earned through proper budgeting routines and the slow satisfaction of lenders by means of regular bill posts. This diligent attention to prior credit obligations allowed Texans to put their money down on better properties and potentially lucrative investments that may one day benefit their heirs and provide a foundation for a better life, and generations of Texans grew up believing that hard work and perseverance would inevitably forge a comfortable hearth and home for their loved ones. However, with kith and kin around Texas suffering through these economic doldrums, this promise by no means seems assured, and many residents of our State have had no other recourse to their overwhelming debt burdens but to examine the possibility of bankruptcy protection to shelter the family assets from forfeiture and defend the wage earner’s income against legal garnishment.
The frontier dreams of laconic cowboys beholden to no one and pioneer families that could only depend upon each other as they settled the territory have drifted away upon the winds of ennobled consumerism and the impersonal separation between borrower and lender. In the Texas before fences were made, the only thing mattered was a person’s word, and folks’ credibility (we’d call this credit now and have a three digit scoring system) was the difference between life and death. It’s no longer a State or country for old mentalities, banks trade on percentages and the Texan family doctor won’t be making house calls anymore. Even the bankruptcy laws – which shielded some of the risk taking entrepreneurs and mavericks that branded Texas as a land of unconquered spirit and urban renewal – have fallen prey to the plodding bureaucratic stampede that enfeebled bankruptcy protections. That idealized lone star vision’s always been a fandango of horizon and silhouette, and, in post-millennial Texas, everyone knows that there is no running away from consumer debts, nobody ever stand apart, and even the proudest families require a bit of help from time to time. The fact is, bankruptcy seems to a lot of Texans like running away from their obligations. No Texan ever wants to think about asking for the assistance promised by bankruptcy filing, but when what the borrower owes exceeds what they have the ability to pay, the protection offered by Chapter 7 or Chapter 13 federal debt management is something that has to be considered.
This issue has become especially relevant in the current economic situation. There was a time when the real estate and financial markets looked like they would continue to expand without boundaries. With our State’s productive capacity in fine fettle, Texas borrowers viewed each new house and each new mortgage as endlessly rewarding investments borne upon an unshaken belief in the stability of our markets, and, sometimes tragically, this reckless optimism also led ordinarily responsible Texans to garner unsecured debt accounts that could only be satisfied by increasingly elusive windfalls. Herds of Texans trampled upon unmapped financial terrain risking their family’s entire life savings. With the aim of creating a better future for their families, Texans racked up unprecedented credit balances banking on the profitability of real estate and stock market investments guaranteed by every seemingly reliable investment company and opinion maker, but a number of Texas families found the supposed authorities to be all hat and no cattle. Given homeowners’ engorged credit account balances and the waning employment opportunities throughout all of the United States, mounting debt loads have become a concern common to Texans of all demographics and, as the most well known route toward liquidation of unsecured burdens, interest in Chapter 7 bankruptcy protection has grown alongside. The continually escalating and ever unpredictable costs of medical care (coupled with the encroaching unavailability of medical insurance), the leveraging of easy credit for housing and essential lifestyle needs, the contracting financial market, and the bleak forecast for employment opportunities all combined to create a situation where even the most responsible of Texas households found themselves in tough or potentially unmanageable debt. This state of affairs has especially affected young Texas families – naturally less likely to have built up the equity in their residences which would ordinarily buoy them through tough times. As real estate property values drop everywhere in Texas from El Paso to Galveston, the financial viability of all home owners – the majority of bankruptcy claimants in Texas according to some recent studies – becomes increasingly tenuous, and borrowers within our State struggle to reach solid budgetary footing. Even though the economy in Texas has a greater fundamental strength and more promising future than what many Americans must contend with, the nationwide and worldwide financial crisis has landed many Texans in dire straits and compelled them to investigate bankruptcy as a course of action for lasting resolution of credit burdens.
Chapter 7 and Chapter 13 programs are not, however, an easy fix for financial difficulties that have sufficiently grown to levels which inspire Texas debtors to seek bankruptcy protection. According to the current United States and Utah regulations, every single source of income within the Texan household must be fully documented on the bankruptcy petition no matter how seemingly insignificant (whether a second job, side work, or a home business that represents less than five percent of the total gross household income) or temporary (such as workers’ compensation or unemployment claims that shall end weeks after the bankruptcy discharge). Following the dramatic alteration of US bankruptcy statutes that were instituted the autumn of 2005, the necessary qualifications for bankruptcy protection have now everything to do with the household’s annual income. Eligibility for the Chapter 7 debt elimination no longer depends upon the amount of consumer debt held by borrowers. Instead, under current federal statutes, the court trustee will be able to evaluate the bankruptcy petition only in regards to the household’s past year’s earnings, as compared to earnings in the rest of the state. To qualify for bankruptcy, a petitioner has to have earned less than the median income in Texas. At the time of this writing—and for obvious reasons, interested Texan borrowers should look up the most current statistics—this means that a lone wage earner filing for Chapter 7 debt liquidation bankruptcy in Texas would have to have earned less than thirty six thousand and eight hundred dollars to qualify for the program. Should the Texan resident filing for bankruptcy have another member of the household to claim, the amount of money that Chapter 7 bankruptcy protection allows will jump up to fifty one thousand and three hundred dollars. It’s only another twenty five hundred dollars more for a three member family, but those Texas households blessed with four souls are allowed sixty one thousand and five hundred dollars.
Here’s where the bankruptcy process gets even more complicated. Along with the Texan borrowers’ possessions, many of these income tributaries would be exempted under either the federal or state guidelines. Still, the income source—even the relative pocket money earned from small businesses or poor investments—must appear on the initial paperwork in order to even be considered legitimate and deserving of said exemption. Here again, so much of this system may seem impossibly arcane to the layman without the advice of experienced legal authorities, but there should be no reason that the Texas borrowers cannot at least examine the various options for their family to see what among their possessions or earnings would be protected in the event that they do decide to file for Chapter 7 bankruptcy. Forfeiture of property has always been the signal menace scaring Texans away from debt elimination bankruptcy protection, but residents of our State should consider themselves particularly fortunate in this regard because the Austin legislature has made sure that the borrowers residing in Texas needn’t worry about many of their various assets being seized by the courts during the course of the bankruptcy. Under the stipulations surrounding borrowers’ property that are rigorously detailed within the United States’ Bankruptcy Code (and recently neutered through the Bankruptcy Abuse Prevention and Consumer Protection Act), the federal government of the United States shields debtors’ assets to a certain degree, but, should they maintain more than twenty thousand dollars in home equity or wish to keep family heirlooms of any significant value, Texas households would want to entirely avoid the national bankruptcy guidelines and concentrate instead upon exploiting those protections granted by the blessing of our state authorities. Texas residents must choose between either the extremely limited slate of exemptions allowed every American enduring the thousand small humiliations that encompass Chapter 7 bankruptcy protection or the far more merciful exemption scheme currently part of the Texas constitution, and, much as it already may seem like natural instinct for Texans to trust their state representatives above the national government, there’s virtually no reason for borrowers to ever step away from the local plan.
Texas home owners, in particular, should be tremendously relieved by the homestead exemption preserving the bankruptcy filer’s primary residence. Even as the overall estate’s laid open to the perusal of governmental authorities, Texas regulations stipulate that no resident of our state would ever have to forfeit real property so long as the home is assessed at either less than ten acres (within city limits) or one hundred acres (outside a municipality); family members or couples jointly filing bankruptcy would find that restriction expanded to two hundred acres. Furthermore, unlike the pittance granted the borrowers in other parts of the nation, Texans petitioning for bankruptcy protection may keep personal possessions of a replacement value judged to be under than thirty thousand dollars; the exemption rises to sixty thousand dollars for the head of a household containing more than one member. Depending upon the mindset of the trustee chosen by the Texas courts to administrate the Chapter 7 bankruptcy protection and the various penalties written into the program (and, to be sure, the skills of the bankruptcy attorney assisting the Texan borrowers with their filing), any objects owned by the household could fall under the gray areas left open due to the broad language employed in the legislative wording of the state exemption, but there are some items specifically shielded from court officers presuming their estimated value lies within the combined dollar total. Among the belongings distinctively mentioned, Texas residents going through Chapter 7 bankruptcy protection should feel safe about maintaining possession of their pets, clothing and apparel, furniture and other domestic furnishings such as utensils and linens, food for the family, jewelry so long as the value of the pieces would not be worth more than a quarter of the total dollar amount of the exemption, and – this is Texas, after all – any football gear or other athletic equipment.
Also, under the same exemption, a single vehicle (whether it’s a—and this is expressly outlined within the code’s verbiage—two or three or four wheeled vehicle, unicycles being evidently at the mercy of the Texas courts) could be protected with the amount of the remaining loan balance deducted from the total value held against the Texan borrowers filing for Chapter 7 bankruptcy. As well, the Texas bankruptcy code contains some specifically delineated exemptions that would likely only be utilized by more rural Texans even though all residents of the state filing for Chapter 7 debt elimination bankruptcy, regardless of their address, would theoretically be able to take advantage of the protections. Whether maintaining a family farm or living on the outskirts of a city, Texan borrowers struggling through bankruptcy are formally allowed one hundred and twenty fowl, two horses or donkeys or mules (along with blankets, bridles, saddles), twelve cows and bulls, and sixty other livestock animals besides bovine creatures. The replacement value of these items falls within the thirty thousand dollar (or, once again, sixty thousand dollar for heads of household) personal property exemption as do any tools of trade or necessary machinery, literature, or uniforms considered essential to the filer’s vocation. However, implements or vehicles utilized by professional farmers working their own ranch along with any business property owned in partnership with another citizen shall be saved regardless of the value, and the same goes for any Texas residents’ medical equipment or family burial plots. Social Security and all retirement strategies, life insurance benefits, familial support including alimony payments, and public assistance proceeds (the funds given to veterans, the disabled, the unemployed, and workers injured on the job) are guaranteed through bankruptcy protection no matter how much money may change hands.
Admittedly, the asset exemptions given to the people of Texas are far less injurious to the economic needs of the borrowers filing for bankruptcy and the comfort of their families than would be expected by consumers residing in virtually any other state. Nevertheless, the estimated value of household goods and tools of trade adds up quicker than one would think, and families who fear losing their most precious possessions to auction (or, rather more pointedly, families that have reason to believe that they would not even qualify for a Chapter 7 debt elimination program) have started looking at some of the other possibilities for the reduction of their outstanding debt balances. Settlement negotiation, especially, has aroused increasing interest among the borrowers of Texas. In particular, the settlement system – in which trained negotiators barter down their clients’ credit balances by as much as sixty-five percent of the original amount by pledging speedy satisfaction of the funds that remain – appeals to Texans who never exactly cottoned to the notion of throwing themselves upon the mercy of the government nor wanted the stigma of bankruptcy protection to remain on their record for up to a decade. While the debt settlement negotiation program won’t improve credit scores in the short term, the push toward total liquidation of the household’s unsecured burdens shall clear the way for future credit opportunities and the subsequent increase in FICO numbers that properly managed household economics inspire and help bring about. Texans drowning in debts beyond their control should still take a look at their own household’s potential for entry to Chapter 7 bankruptcy (and even more closely examine the pitfalls surrounding the program), but when thinking about the many problems now endemic to bankruptcy protection, Texans may actually be better off enlisting the services of a professional negotiator to obtain the most advantageous settlement.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
