Proper Legal Representation Needed When Filing Chapter 7 or Chapter 13 Bankruptcy



Posted: Saturday, June 27, 2009

by Tony Bertolino
Bertolino LLP

The growing problem of bankruptcy is not just happening in Texas. Everyone is facing difficult questions in this economy. Do we need to sell our home for a more affordable mortgage? Will our children be able to go to college? Who will tell our parents that we cannot make the visit to see them this summer? There are several options available to those who face dire consequences if an improvement to financial circumstances is not seen quickly. Debt consolidation services are finding greater interest from consumers who are drawn to the idea of having one monthly payments that will address the demands of all of their creditors. Sometimes, however, this option is simply not enough. As Texan debtors and others across the country are deciding, filing for bankruptcy protection may be your best option in these uncertain times.

The recent numbers concerning bankruptcy in our state show what is increasingly becoming a harsh reality for our fellow Texans, particularly in Austin, Houston and San Antonio. Just in the first few months of 2009, court records indicate that approximately 2,672 bankruptcy cases have been filed in Houston. This number shows a 6.2% increase over the 2,515 cases that were filed during the same time period last year. The jump in filings in some of our other major cities is even more startling. In San Antonio, the bankruptcy filings for the first three months of 2009 totaled 1,127, which is a 22.5% increase from the 920 such filings, which occurred between January and March of 2008. And, the numbers indicate that those living in our state capitol in Austin are also trying to relieve themselves of some of their overwhelming financial burdens. Bankruptcy filings of all types in the Austin area totaled just over 800 in the first quarter of 2009, which is up 25% from the same period last year. Despite data that shows more Texans are struggling to maintain their personal financial standing, our state is still faring better that most others in the country. Last year, Texas ranked forty-sixth in the nation in bankruptcies, even better than our 2007 ranking which placed us at number thirty-nine. Of course, this relatively good news does nothing to lessen the pain of each individual who is facing bankruptcy.

For those who are considering the option of declaring bankruptcy, you should be aware of the state and federal laws that affect such filings in Texas. There are two options available to individuals—Chapter 7 or Chapter 13 bankruptcy.

Chapter 7, the most common approach, is considered straightforward liquidation bankruptcy in which your non-exempt assets are handed over to a trustee appointed by the court and then converted into cash to pay your creditors. In reality, most people who file Ch. 7 have no non-exempt assets to sell and the Ch 7 bankruptcy filing essentially becomes a fresh start for their finances. The federal bankruptcy laws in Texas have deemed it so you can determine if you want to use the federal exemption statutes or the Texas statutes when cataloging the assets that creditors are not allowed to touch. With Texas having the most generous list in the country concerning what debtors may keep, most bankruptcy filers choose to follow the Texas guidelines. You are eligible for Ch 7 bankruptcy if your income is below that of the median family income in Texas, as determined by U.S. Census Bureau statistics. If it is initially determined that your income is too high to qualify for Chapter 7 bankruptcy, the court can review your income from the past six months and your current expenses to form a decision based on your specific situation.

If the bankruptcy court determines that your financial standing makes you ineligible for a Ch 7 filing, then Ch 13 may be the most appropriate action for you. Under this system, known as debt reorganization bankruptcy, debtors develop a payment plan that will repay creditors over a period of three to five years. If you have some non-exempt assets that you wish to retain even after declaring bankruptcy, you may prefer to file as a Chapter 13 bankruptcy. This also holds true for people who have debts such as taxes or students loans that cannot be cleared through a Chapter 7 bankruptcy.

While a Chapter 13 filing may be seen as similar to working with a debt consolidation service, as both set up regular payments with the intention of bringing you current with your creditors, individuals looking for financial relief should know there are differences in the two options. With Chapter 13, you get the assurance of a court-appointed trustee (who may or may not be lawyers) who works with you to make sure that payments are appropriate and processed correctly. On the other hand, some private companies may be scams out to make a profit by charging exorbitant fees and they may not even result in the credit relief you desire. Such contracts should only be signed after completing extensive research on the company and reading the experiences that others have had.

Filing bankruptcy may seem like a wonderful solution to a financial crisis that has been draining you for years and this is true in many cases. However, you must remember that when you hire an attorney and declare bankruptcy you are affecting your assets, your credit score, and creating a record that is available to the public. It is essential that you have an effective and thorough bankruptcy lawyer who will be by your side as you navigate through the bankruptcy courtroom proceedings and the cumbersome paperwork. Mistakes can result in losing assets that you consider essential to protect. Federal criminal charges may result if you do not report some of your assets. Why take any chances with your money, your treasured belongings, and even your future? If you may be filing a Chapter 7 or Chapter 13 bankruptcy soon, your first step should be a phone call to an experienced bankruptcy attorney.

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Tony R. Bertolino is the managing partner of Bertolino LLP, a law firm with attorneys in Austin, Houston, and San Antonio who practice bankruptcy law. The attorneys at Bertolino LLP can assist with both Chapter 7 bankruptcy and Chapter 13 bankruptcy cases.
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Top-level comments on this article: (1 total)
» left by Teresa Ortiz
 2 years 333 days ago.
188 fans.
Hi Tony, thank you for sharing this important information. It's unfortunate the amount of people who are facing this problem. Many for the first time in their lives and would have never dreamed of such a need. Blessings to you! Teresa
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