In a Chapter 7 bankruptcy, federal law lets you use Texas exemptions, which usually protect all your assets from your creditors and from the bankruptcy trustee.
RULE #1 ABOUT CHAPTER 7
The main rule of Chapter 7 bankruptcy is that you get to write off (“discharge”) all or most of your debts IF you accurately present your financial information to the bankruptcy court AND you give the Chapter 7 trustee – acting on behalf of your creditors – whatever assets you own that are NOT EXEMPT. That is why Chapter 7 bankruptcy is called “liquidation.” But if you’re like most people filing for bankruptcy in Texas, EVERYTHING you own is exempt, so you get to keep everything without giving anything to the trustee.
Exemptions are a set of laws that protect categories of your assets, sometimes with specific dollar limitations. Federal bankruptcy law generally allows residents of each state to use that state’s set of exemptions when filing for bankruptcy. Some states, including Texas, give its residents the ability to choose between using the state or the federal set of exemptions. In most situations, the Texas exemptions are more generous than the federal ones, allowing most Texans to keep all of their assets when filing under Chapter 7.
THE JOB OF THE CHAPTER 7 TRUSTEE
Your bankruptcy trustee’s main task is to figure out whether you have anything that is NOT covered by the Texas exemptions. That’s the main point of the brief hearing with the trustee you are required to personally attend. It’s called the “meeting of creditors,” but that’s a misleading name because usually none of your creditors will be there. Before that hearing the trustee looks over the bankruptcy documents we file for you at court, plus some other information we send directly to the trustee. Then at the hearing, he or she asks some questions, mostly to follow up on what was in the paperwork. Usually the goal is for the trustee to conclude that everything you own is exempt, allowing you to keep everything. That’s called a “no-asset” case – since everything is exempt, the trustee will be taking no assets from you to liquidate in your case.
It’s important to understand that exemptions do not trump the rights of secured creditors – those who have a legal right to collateral. The law gives a secured creditor these rights, usually but not always because when you took out the loan you voluntarily gave the creditor that right. Good examples of this are the mortgage on a home and a vehicle lender’s lien on a vehicle. So the exemptions do not protect you from a home foreclosure or repossession of a vehicle by the creditors secured by those assets. As Texas law says, the exemptions do “not prevent seizure by a secured creditor with . . . security in the property to be seized.” The exemptions are relevant to the extent that the collateral has value beyond the amount of the debt against it; the exemption protects all or some of that equity from the trustee and other creditors.
If you live in the Dallas/Fort Worth metroplex, let us at The Law Offices of Roger Fuller help you get the full benefit of the Texas exemptions. Schedule a free, no-obligation, confidential consultation either by calling us at 214-516-6187 or by reaching us here. Thank you for visiting our website.