How to Prepare for Bankruptcy

So far, through September of 2021, some 14,662 Texans have filed for bankruptcy protection. Most of these people chose the Chapter 7 liquidation route, 9,507 or 64 percent of them, while the remainder mostly opted for a Chapter 13 reorganization/repayment plan, or 4,441 at 30 percent. The last 5 percent, because of total income or assets exceeding the requirements for the other two chapters, were forced to use Chapter 11, representing 687 filers.

The word bankruptcy strikes fear in the hearts of most people. It seems to represent both failure and the loss of everything they’ve worked for their entire lives, but what it really represents is a fresh start. As for losing everything, with Texas’s generous bankruptcy exemptions, you can generally keep your home, your cars, and your essential belongings.

Want to get those harassing collection calls, texts, emails, and knocks on the door to stop? Bankruptcy will silence your creditors while you work out the arrangements for discharging your debt load.

If you’re in Amarillo, Texas, or in the Texas panhandle and are facing overwhelming debt that you can’t manage, contact me at the Swindell Law Firm. I have been helping people like you for more than 40 years to make a fresh start by utilizing the bankruptcy code in the way it was intended – to help you obtain financial wellness and restore your peace of mind.

I proudly serve clients in the entire Texas panhandle, including Borger, Pampa, Hereford, and Dumas.

What Bankruptcy Does

Bankruptcy allows two main options to clear away your dischargeable debt – either by using your disposable income to consolidate your bills and pay them off over a three- to five-year period (Chapter 13), or by discharging your debt without a payment plan (Chapter 7).

In either route, Texas’s bankruptcy code allows you to exempt your home of almost any value so long as you are current with your mortgage payments. If you are in arrears in your mortgage, under Chapter 13 you can include your past-due amount in the repayment plan you submit. Texas state exemptions also allow you to retain a vehicle for each licensed and driving member of the household, though you have to continue making payments.

What is beneficial about both options is that they come with what is called an “automatic stay,” by which the court orders creditors and collectors to cease contacting you under penalty of sanctions. The stay also stops any foreclosure or repossession efforts, though secured creditors can file to move ahead if you show no effort at catching up on past-due payments.

Preparing for Bankruptcy

When we meet, we can discuss your personal situation and determine whether a Chapter 13 repayment plan or a Chapter 7 is your best choice. Meanwhile, as you prepare to file for bankruptcy protection, there are various practical and legal steps you should take.

Certain debts are not dischargeable under any code of the bankruptcy law. Most student loans, spousal and child support payments, and taxes will remain as is So, you want to make sure you keep current with those obligations, certainly taxes.

It’s also important that you stop using and accumulating credit. Whatever debt you acquire within 90 days of your bankruptcy filing may not be covered by your Chapter 13 or Chapter 7, and you will be personally liable for those items. In other words, don’t go on a buying spree with whatever credit you have leftover on your cards right before filing.

If you have automatic payments deducted from your checking card or credit card, stop those as well. Meanwhile, make sure you pay your car notes and home mortgage. Dealing with arrears payments only complicates any type of filing, and in Chapter 7, there is no provision to roll your past-due amounts into a lump sum repayment plan. You’ll have to work out arrears’ payments with your secured creditors or face possibly losing your cars and home.

Finally, and most importantly for filing purposes, assemble and document your debt obligations and income statements to accompany the legal paperwork needed to get the bankruptcy process going.

What Not to Do Prior to Filing

In addition to the steps you should take to prepare for bankruptcy, there are also several things you shouldn’t do. For example, don’t pay debt obligations that will be dischargeable under bankruptcy, which usually means any unsecured debt you have, such as credit cards and certain personal loans. Also, don’t dip into your retirement savings to pay debts. Retirement savings are protected under bankruptcy, so it’s foolish to use the money for debts when you’ll need it later on for retirement.

As already mentioned, it’s also important that you don’t acquire new debt. There’s a good chance it won’t be honored. Don’t try to transfer property or assets, either. If you move a car or piece of property into someone else’s name in hopes of acquiring it back once the bankruptcy is over, this can be a red flag for the bankruptcy court. It could even lead to your bankruptcy being denied, or worse, being charged with bankruptcy fraud. The same holds true if you transfer $20,000 (or whatever sum) to a son or daughter’s account, trying to stash it away until everything blows over.

Finally, don’t selectively pay some creditors and not others. Of course, you’ll want to keep current with secured obligations and pay your utility bills, but you should treat all unsecured creditors equally. One of the first steps in the bankruptcy process, either during Chapter 13 or Chapter 7, is a meeting with creditors. They could challenge your intentions if you’ve been selectively paying some and not the others.

How Legal Counsel Can Help

Meeting with an attorney before filing is the best first step to take, certainly to determine which type of bankruptcy to file, but also to help you prepare your repayment plan under Chapter 13 and to help you protect your assets under Chapter 7.

An experienced attorney can also help prepare the documents needed for your filing, and then represent you before creditors, the bankruptcy trustee, or the court to prevent you from saying or doing something that could come back to haunt you. Remember, honesty is the best approach when it comes to bankruptcy.

If you’re located in or around Amarillo, Texas, and the entire Texas panhandle, call me at the Swindell Law Firm. My 40-plus years of experience will help you achieve peace of mind and confidence as you go through the bankruptcy process.

I offer a free initial consultation and charge reasonable fees as you enter the bankruptcy system and come out at the other end with your dischargeable debts gone and a fresh start before you.