The Law Office of Carol Cross Stone, PLLC accepts cases in the area of consumer bankruptcy for individuals and small businesses. We are here to help aid your economic restoration. We have over twenty years of experience helping the economically oppressed overcome debt issues. We understand what you are going through. We can help.

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We offer a free initial consultation for people considering bankruptcy. If you have a question that is not answered, please feel free to contact us by phone, mail or our message center. Before reviewing the information or using our message center, please read the disclaimer concerning information on this site and email transmissions.

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Proudly Serving Northeast Texans

We are honored to serve clients in Northeast Texas with our office being centrally located in Longview, TX. Please remember the material is educational, and may not apply to your particular situation.

Contact Information

(903) 759-5922 (Direct)
(866) 929-0734 (Fax)
Get driving directions to our office.

We offer personal, caring service. If you are considering bankruptcy, we understand that you have had enough stress and turmoil. We make every effort to make the process as smooth as possible. We listen to what you are saying and try to address your concerns. We strive to obtain as much relief through bankruptcy as possible and do our best to make sure you understand the process and know what to expect – no surprises. We do not judge you, or look down on you. We treat you like we would like to be treated, with courtesy and respect.

(903) 759-5922 (Direct)
(866) 929-0734 (Fax)

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This web site is not intended for the purpose of offering legal advice. Each person's legal needs are unique. Laws and the court's interpretation of those laws change frequently, and it is possible that some of the information at this site may no longer be accurate. Additionally, the Courts in your area may interpret those laws differently than set out herein. You should consult with an attorney familiar with the law in your area and discuss your particular facts before making specific legal decisions.

Do not send us any confidential communication unless you are willing to take this risk that the communication may be intercepted. If you have questions, or would like further information, please contact The Law Office of Carol Cross Stone, PLLC by e-mail, telephone, fax or mail. Do not include any information you consider confidential in this initial communication, and we will see if we can assist you. We will reply to an e-mail inquiry by return e-mail unless you ask us to respond by some other medium.

We limit our practice to Texas, in the areas of bankruptcy and consumer law. If you have a question concerning another area the law or about the laws in another state or jurisdiction, we may be able to assist you in locating a qualified attorney that handles the type of law related to your problem in your state.

Under federal law, because we assist our clients in filing bankruptcy when appropriate, we are considered a Debt Relief Agency.

To find out more about bankruptcy: call (903) 759-5922 or send us a message online.

• Filing Bankruptcy in East Texas

• Chapter 7 Bankruptcy Information

• Chapter 13 Bankruptcy Information

• Common Bankruptcy Myths

• Stop Creditor Harassment

• Life After Bankruptcy

• Alternatives to Bankruptcy

• History of Bankruptcy

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How a Chapter 7 Works

This is a liquidation bankruptcy, sometimes called "straight bankruptcy". The principle advantage is that the debtor comes out without any future obligations on his discharged debts. However, bankruptcy does not wipe out most mortgages or liens. If a debtor wants to keep an item (Ex: house or car) which is security for a loan, he must continue these payments. If the debtor wants to discharge that car loan (not be obligated on the debt any longer), then he must surrender the car to the creditor.

A Chapter 7 debtor is seeking a discharge of his obligations to pay his debts. However, bankruptcy does not discharge most taxes, most school loans and some other debts. The ability to discharge such debts as taxes and school loans depends upon the age of the loan and numerous other factors. Thus, a complete review of each client's debts must be made to determine what debts, if any, will remain after discharge.

Chapter 7 bankruptcy is often referred to as a "straight" bankruptcy or a "liquidation." In Chapter 7, most of the debtor's property or assets are protected by law. In rare cases, the bankruptcy trustee will take the unprotected or non-exempt assets and sell them to use the funds to distribute pro-rata among the unsecured creditors. In Texas, very few debtors in Chapter 7 are required to turn over any property to the trustee. On secured debts, the debtor either reaffirms the debt (continues to make payments), surrenders the property back to the creditor, or redeems the property (making a lump sum payment equivalent to the value of the merchandise).

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Means Test

Since 2005 when the Bankruptcy Reform Act was passed, a person wanting to file a Chapter 7 discharge must qualify by passing a means test. Essentially, what this means is that the family's income after deduction of certain expenses must be below a certain level which establishes that the debtor has no means to pay back the debt. This "means test" is determined by using the past 6 months of wages and certain expenses. However, if there have been changes in a debtor's income or expenses, he may show special circumstances to overcome the presumption of ineligibility for Chapter 7 bankruptcy. If a debtor doesn't "pass" the means test, and still needs to discharge debt, he still has the option of filing a Chapter 13 bankruptcy.

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Keeping Your Stuff

State and federal laws provide what are called "exemptions." Exemptions are used to protect property from seizure in a bankruptcy. Texas permits most debtors to choose between the Texas state and federal exemptions. If you have moved here from another state, or have not lived in Texas for the last two years, you can still file bankruptcy in Texas, but another state's exemption choices may apply. An exempt asset is determined by the law that applies and allows a debtor to keep certain property. Depending on the type of property, there may be dollar value limits imposed. Certain categories of assets such as money in bank accounts, stock, tax refunds and real property other than the debtor's homestead are assets which are considered "non-exempt assets." In other words, exempt items are protected, which allows the debtor(s) to retain them and non-exempt items are not protected and can be taken by the trustee to be sold and/or converted to cash for distribution to the unsecured creditors in a chapter 7 bankruptcy proceeding.

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Protecting Your Property

If the non-exempt (non protected) assets have a high enough value to provide for payment of the trustee's fees and expenses and have money remaining to distribute to the unsecured creditors, the trustee will take these non-exempt assets, liquidate them to cash, and distribute those assets pro-rata to the unsecured creditors. Although there is no magic dollar figure, the trustee rarely liquidates any assets unless he can receive at least $1,500.00, after any expenses, from the sale of the non-exempt assets. To avoid liquidation, a debtor can choose to file a chapter 13 reorganization.

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Texas Bankruptcy Exemptions

The Exemptions in Texas consist primarily of the following items:

1. Homestead or proceeds from the sale of the homestead for up to six months after the sale. If the homestead is an urban homestead, up to 10 acres in contiguous lots may be exempted. A rural homestead may be exempted up to 200 acres for a family or up to 100 acres for a single individual. If you have not owned your homestead for 1215 days, different rules may apply.
2. Personal property up to $30,000.
3. Certain types of insurance proceeds, annuities, and pensions.
4. Public benefits, such as medical or public assistance or unemployment income.
5. Tools of the Trade up to $10,750.
6. Wages – 100% of earned but unpaid wages and 75% of unpaid commissions.
7. Certain retirement plans such as an IRA, 401(k).
8. Tractor, specific number and type of livestock, and certain farming tools.
9. Motor vehicle up to a certain limit.

Keep in mind that if you are filing with a spouse, many of the exemptions double. Even where the debtor chooses the Texas state exemptions, some exemptions under federal law, such as certain types of retirement plans can be exempted. Although there are a few other items which may be exempted under Texas law, most people filing bankruptcy do not own or hold any exempt assets other than those listed above.

The most common non-exempt assets that the bankruptcy trustee liquidates in Chapter 7 proceedings are real property other than one's homestead; debts owed to the debtors such as pending tax refunds; a portion or all of a personal injury claim or other potential claims or lawsuits in which the debtor holds an interest, and interest in estates.

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Federal Bankruptcy Exemptions

The primary Federal exemptions are:

1. Homestead – up to $20,200 in equity ($40,400 joint filing) can be used to exempt the debtor's homestead. Where the debtor owns no homestead, he can use $1075 plus an additional $10,125 ($20,250 for a joint filing) to exempt any real or personal property.
2. Household Goods – up to $10,775 (21,550 joint filing).
3. Certain retirement funds and benefits.
4. Certain annuities.
5. Insurance, including disability, illness or unemployment benefits.
6. Alimony and child support needed for support.
7. Motor vehicle up to $3,225.
8. Personal injury recoveries to $18,450 (not to include pain and suffering or pecuniary loss). Wrongful death recoveries for death of person debtor depended on for support.
9. Crime victims' compensation, public assistance, social security, unemployment compensation, veterans' benefits.
10. Implements, books and tools of trade to $2,025.
11. Wild Card – $925 of any property plus up to $9250 of unused portion of homestead, for any property.

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Secured Debts (Mortgages and Car Loans)

Secured debts are those where the creditor has a security interest. Normally, a security interest is obtained in writing, such as a deed of trust on a home, or by taking a lien against a car title, but not always. Sometimes, security interests arise when a seller finances the item, such as a computer purchased at a big box retailer on the store credit card.

A debtor has four options on secured debts, where the creditor is holding collateral to enforce the payment of the debt: reaffirmation, redemption, or surrender. The most common examples of secured debts are home mortgage loans, automobile purchase loans, seller's or vendor's liens retained at the time of purchase by retailers such as Sears or jewelry stores, loans by finance companies taking such items as VCR's, TV's, stereos as collateral.

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Reaffirmation Agreements and Secured Debt

First, the debtor can reaffirm the debt, meaning that the debtor agrees to keep making payments as if there had never been a bankruptcy filing. On most auto loans and house mortgages, the creditor will require that the entire loan be reaffirmed, the loan be current and that the regular monthly payment be maintained. Most loans secured by household goods (if valid) can be renegotiated, reducing the balance and the monthly payment.

If a debt is reaffirmed in either manner, the debtor is then entitled to retain the property. Failure to make payments following the reaffirmation of a debt can result in a repossession of the item(s) and collection of the deficiency after the sale.

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Redemption of Secured Debt

Second, the debtor can "redeem" the collateral by making a one-time lump sum payment equivalent to the value of consumer goods. For example, if a debtor owes $10,500 on a car and it is only worth $6,000, the debtor can obtain clear title to the car by paying the creditor $6,000. Obviously, most debtors cannot use redemption as a method to retain the collateral.

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Surrendering or Giving Up Property (and the Payment!)

Third, the debtor can surrender the collateral back to the creditor. The entire debt will then be discharged, and the creditor cannot collect a deficiency balance following the sale of the item.

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Avoiding Liens in Chapter 7

In some instances, a debtor may avoid a lien, retain the collateral and discharge the debt. If a creditor such as a finance company has a non-purchase money lien on household goods such as a microwave, lawn mower or furniture, the debtor can avoid the lien pursuant to 522(f) of the bankruptcy code. To do this the item must be exempt (See explanation of exemptions in Texas or Federal exemptions).

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Court Appearance at the 341 Meeting of Creditors

Every debtor must attend a "meeting of creditors". The name implies that all the creditors will attend that meeting. However, only a few of the secured creditors normally attend. The meeting usually takes between five and fifteen minutes. We prepare you for and attend the hearing with you. At the hearing, the Trustee asks the debtor some basic questions about information in the schedules (papers filed with the bankruptcy petition). In a Chapter 7, the Trustee will ask about the debtor's desire to retain the items which are collateral for the secured loans.

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Receiving Your Discharge

As a general rule, most unsecured debts will be discharged in a Chapter 7. An unsecured debt is a debt where the creditor is not holding any collateral or security to enforce payment of the debt. The most common examples of unsecured debts are credit cards/credit lines, medical bills, and utility bills.

In Chapter 7 bankruptcy, each debtor will receive a notice of discharge by mail about 3 months after the 341, which will indicate that their debts have been discharged. This discharge, however, will not include secured debts to be reaffirmed, and any non-dischargeable debts (See Above). If a creditor objects to discharge of a debt or other litigation is filed, the discharge may be delayed.

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What You Must Do To Obtain Discharge

Before you can obtain your discharge, you must take pre-discharge bankruptcy counseling. You can take it from the same company that you took the pre-petition counseling from – only this is geared more toward personal financial management. You have only 45 days from the Meeting of Creditors to take this. If you miss the deadline, your case will be dismissed. If you are allowed to re-open, you have to repay the $299.00 filing fee. Ouch!

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How Chapter 13 Works

Chapter 13 Bankruptcy is often referred to as a "wage earner plan" or a "debt repayment plan".

In Chapter 13 Bankruptcy, the debtor files a "Chapter 13 Plan" with the bankruptcy court agreeing to make the best effort to pay off as much debt as possible over a three to five year period of time. The plan will classify debts in different categories such as secured and unsecured debts. Some debts, such as taxes and secured debts may be paid in full while others may only be paid a portion of the amount owed. In many cases, unsecured creditors do not receive any payment.

The debtor makes a monthly payment to a bankruptcy trustee determined by monthly take-home pay less monthly living expenses. (For example, the debtor's after tax income is $2,200 per month, and the family's living expenses are $1,900 per month [this amount does not include debts that will be paid through the plan such as car notes], the payment to the trustee will be $300 per month.) As mentioned above, the trustee will first pay priority debts (such as taxes & back due child support) together with the secured debts. From the funds left over after payment of secured and priority debts, the trustee will pay the unsecured creditors pro-rata. That means the unsecured creditors will get a portion of their debt repaid based on what they are owed. Most unsecured debts remaining at the end of the case are discharged. One exception is the remaining portion owed on governmentally insured student loans will not be discharged in most cases. In extreme cases, student loans can be discharged, but you must prove hardship, and the burden of proof is high.

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Advantages of Chapter 13 Bankruptcy

Chapter 13 Bankruptcy, in some circumstances, can offer significant advantages over a Chapter 7 Bankruptcy. The main advantages are:

1. More debts are dischargeable in Chapter 13 Bankruptcy than in Chapter 7 Bankruptcy;
2. Non-dischargeable debts can be repaid through the Chapter 13 Plan (these include back taxes and child support). In many cases the monthly payment required will be substantially less than the creditor, such as the IRS, was requiring prior to the filing of the bankruptcy. Additionally, the priority debts can be paid without additional interest being added after the petition date.
3. In a Chapter 13 bankruptcy, a debtor can keep property which might be lost to the Trustee in a Chapter 7 bankruptcy.
4. In a Chapter 13, secured debts are generally reduced to the value of the property involved. This is called cram-down or strip off. For example, if a debtor owes the bank or finance company $10,000.00 but the car which is the collateral for the loan is worth $7,000, the secured creditor will be paid the $7,000.00 plus interest through the plan. In the majority of cases, the interest rate paid through the plan is substantially lower than what you were paying before you filed bankruptcy. Below an illustration to explain how bankruptcy can lower a car payment:Assume that you own a vehicle which was purchased at least 910 days before bankruptcy was filed. You are upside down on the car and still owe $15,000 on a car worth only $10,000. In a Chapter 13 bankruptcy, however:
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5. A debtor can prevent auto repossessions and home foreclosures, and (in the case of a home foreclosure) repay the delinquency over a period of time.

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Disadvantages of a Chapter 13 Bankruptcy

While Chapter 13 Personal Bankruptcy can offer some real advantages to a debtor, there are significant disadvantages as well:

1. Chapter 13 Personal Bankruptcy cases now come under greater scrutiny from the Court and from the Trustee. This is not a reason not to file a Chapter 13 Personal Bankruptcy though. The very foundation of the Bankruptcy Code is to provide relief for the honest debtor.
2. A debtor in a chapter 13 personal bankruptcy cannot sell any property without approval from the court.
3. A debtor in a chapter 13 personal bankruptcy cannot borrow any money without approval from the Chapter 13 Trustee.
4. A Chapter 13 Personal Bankruptcy case requires a debtor to be "in bankruptcy" for at least three years, whereas a Chapter 7 Personal Bankruptcy case is normally concluded in three to four months. As a result, the debtor cannot attempt to rebuild his or her credit until the case is closed out.
5. Lump-sum distributions such as personal injury and worker's compensation settlements are considered future income and can be considered in the disposable income test and may have to be turned over to the Trustee. There may be exemptions available for a portion or all of a personal injury or workers compensation settlement depending on your particular facts.

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Stop Home Foreclosure in Bankruptcy

Chapter 13 Personal Bankruptcy is especially helpful for catching up past due house payments. For example, if you are behind on your mortgage, you can pay back the past due payments over a three to five year period with no interest and no post-petition late fees. To illustrate, your house payment is $1,000 a month. You are five months behind. You would pay back through the Chapter 13 Plan at $83.33 per month if you had a 60 month (5 year plan). While the mortgage is being paid back, you must stay current on your regular monthly payment, but the mortgage company cannot foreclose because of the past due balance. If you fall behind in the Chapter 13 Plan, the mortgage company can file a Motion to Lift the Stay and foreclose. This means they can ask the Judge to do away with the protection of the bankruptcy and allow them to foreclose.

Another possibility of obtaining relief on a mortgage through bankruptcy (that we are seeing more frequently with declining home values) applies if you have a first and second mortgage. If the value of your home is worth less than the first mortgage, the second mortgage can be "stripped off" and treated as unsecured in a Chapter 13 Plan. What this means is that the second mortgage would receive the same amount as other unsecured creditors through the Chapter 13 Plan. Most Chapter 13 Plans pay a very small percentage or sometimes nothing at all to unsecured creditors. You would still have to make your first mortgage payment though.

Special rules apply where your home is a manufactured home and the home and land are financed separately. Or where you just financed the mobile home and own the land outright. In this situation, the mobile home can be "crammed down." This means you can propose a Plan where on the mobile home you would only pay back the value, not the principle balance. This can be very helpful where you have owned the mobile home for several years, but you owe substantially more than it is worth. The same is true of the land in this situation where it is financed separately from the home, and you owe more than the land is worth.

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Catch Up on Past Due Taxes in Bankruptcy

A Chapter 13 personal bankruptcy may be a good option for someone who owes taxes that are not dischargeable. Depending on when the tax was due; the type of tax; when the return was filed; and when the tax was assessed, your taxes may be treated as a priority debt. This means the tax debt will be paid before other debt. This is important because one main goal of filing bankruptcy is to have a clean slate, a fresh start when you receive your discharge. In some circumstances, taxes may be dischargeable.

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Going to Court in a Chapter 13 Bankruptcy

Every debtor must attend a "meeting of creditors". The name implies that all the creditors will attend that meeting. However, only a few of the secured creditors normally attend. The meeting usually takes between five and fifteen minutes. We prepare you for and attend the hearing with you. At the hearing, the Trustee ( or his representative) asks the debtor some basic questions about information in the schedules (papers filed with the bankruptcy petition). In a Chapter 13 Personal Bankruptcy, you will be required to provide verification of specific items. We generally know what the Trustee requires for verification and will have already obtained that documentation from you. The only thing you will need to bring to the Meeting of Creditors is your government issued photo id and your social security card.

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Requirements for Completing a Chapter 13 Bankruptcy

The requirements for completing a Chapter 13 Personal Bankruptcy are generally:

1. all your income tax returns must be filed;
2. you must be current on any domestic support obligations;
3. you must have completed your personal financial management course; and
4. you must have made all your Chapter 13 payments.

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When Should I File Bankruptcy?

Bad things do happen to good people. If you are overwhelmed with debt, to file bankruptcy may be a wise choice. While our law firm specializes in bankruptcy, we can assist you with nonbankruptcy options, or will refer you if better nonbankruptcy options are available.

Signs that tell when you should file bankruptcy:

1. More than one month behind on mortgage;
2. Behind on vehicle and unable to catch up;
3. Unable to meet your basic monthly expenses, such as groceries, housing, transportation, and utilities, without using credit to make your expenses;
4. Taking cash advances, payday loans, title loans or other high interest loans;
5. Major loss of income, or unusually high increase in expenses such as medical bills;
6. Tax debt;
7. Unable to afford to make more than the minimum payments on your debt;
8. Losing sleep or suffering extreme anxiety due to worry and stress over money;
9. If you have received a notice that your home is going to be foreclosed;
10. If you have received a notice that your car is going to be repossessed.

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Impact on Credit Score

Bankruptcy can stabilize your finances. Obviously, bankruptcy damages your credit score. However, a foreclosure, judgment and multiple charge-offs that are continuously reported to the credit bureau are also damaging to your credit score. You should consult with an attorney about whether a bankruptcy is appropriate for your situation, as only a review of your specific situation will allow them to give you vital information such as the impact of the bankruptcy on your credit score, in the short and long run.

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Timing your Bankruptcy Filing

The timing in filing your bankruptcy is of critical importance for several reasons. Regardless of whether you file a Chapter 13 or a Chapter 7 bankruptcy case, the last 6 months of income (not counting the month of filing) is extremely important. If you get bonuses on an irregular basis, you may need to file either before or after a bonus in order to maintain your eligibility. Another illustration of the importance of timing is certain rules on the dischargeability of debts arising from cash advances or luxury purchases made immediately before bankruptcy is filed. Your bankruptcy lawyer will look at these details and help you determine the most favorable timing for you.

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What a Bankruptcy Is

Bankruptcy is the how the law, in contemporary times, removes the burden of overwhelming debt from a individual's (and family's) shoulders. Depending on the type of bankruptcy filed, a stressed out debtor can totally wipe out debt, lower car payments, and catch up on a mortgage or taxes.

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What Bankruptcy Does

Bankruptcy can give a family a chance to start over and regain financial stability.

Bankruptcy allows an individual or a family to repay a portion of his debts and still retain his home, cars, personal property and dignity.

Bankruptcy may eliminate most or all of most debts.

Bankruptcy can stop foreclosure.

Bankruptcy can stop auto repossession.

Bankruptcy can stop wage garnishment.

Bankruptcy can stop the termination of utility services.

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Restricted Types of Debt

Bankruptcy cannot wipe out child support, certain back taxes, criminal fines and most student loans.

Bankruptcy cannot do away with the payment of most secured debt unless the debtor is willing to pay for the property, although you may be able to catch up over time, or lower a car payment.

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Filing an Emergency Bankruptcy

If you are being garnished, sued, or facing an immediate foreclosure or repossession, you can file an emergency bankruptcy to stop further action. The bankruptcy laws permit bare bones paperwork to be filed provided that you file all the completed paperwork within fifteen days of the petition date. The filing of the bankruptcy can instantly stop these matters from proceeding.

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How long you have to live in Texas to file bankruptcy

You can file bankruptcy in Texas as long as you have lived here for the majority of 180 days. If you have lived only in Texas for 91 days, you are eligible. You may not be eligible, however, to use the Texas state exemptions. That is determined by the state you lived in during the last two years. If you have lived in more than one state during the last two years, you look at the state where you lived in the 180 days before the 2 years. Exemptions are extremely important since this determines how you are able to protect your property.

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Chapter 7 vs. Chapter 13

The most common types of bankruptcies filed by individuals and small businesses are Chapter 7 and Chapter 13. As explained in more detail below, a Chapter 7 is where you wipe out all your unsecured debt, and you reaffirm debt for property that you want to keep. Chapter 13 is where you reorganize your debt over a period of time. You must be eligible for a Chapter 7 bankruptcy. If you decide bankruptcy will help you, choosing between Chapter 7 and Chapter 13 is a decision you and your attorney will carefully make.

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Bankruptcy Reform Act of 2005

Bankruptcy relief is still available and effective despite the Bankruptcy Reform Act of 2005. A common myth seems to be spread around that not many people can file bankruptcy after the reforms of 2005, or that you don't get very much relief. This is not true. While the BAPCPA does make some people ineligible for a Chapter 7 bankruptcy, bankruptcy still offers substantial benefits to the overwhelmed debtor. The purpose of bankruptcy has always been to give the honest debtor a fresh start. This clean slate is still available and offers hope and help to many families.

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Spouses Not Required to File Bankruptcy

Both spouses are not required to file bankruptcy. There are particular situations where a married couple may not need for both spouses to file bankruptcy. Examples are where most of the debt is only in one spouse's name, or where one of the spouse has filed bankruptcy before and is eligible yet for a second filing.

Even if you are separated from your spouse, you will have to provide income information about your spouse's income, and the amount of the income that is used to contribute to the expenses of the household.

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Filing Bankruptcy Again

Many people think that if they have filed bankruptcy in the past, they cannot file again if they have financial problems again. This is not true. There may be a waiting period. For example, if you have filed a Chapter 7 bankruptcy, you cannot file another Chapter 7 bankruptcy for 8 years, but you can file a Chapter 13 bankruptcy in only 4 years. The time period is measured from the date you filed the first bankruptcy case to the date you filed the second bankruptcy case, not the date of discharge. The rules are very technical, but do not rule out bankruptcy as a potential option because you have filed in the past.

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Co-signed Loans

People often turn to a close relative or friend when having financial trouble. If a relative or friend has co-signed a loan for you and you need to wipe out the debt in bankruptcy, the lender can still collect from the co-signer. The exception to this is if you file a Chapter 13 bankruptcy. In a Chapter 13, you can reorganize the debt, paying it off over time, and the lender cannot take action to collect from the co-signer.

Another problem that we see is people wanting to pay back a relative or friend on a pre-bankruptcy loan. In a Chapter 7 bankruptcy, after your discharge is entered, you can make any arrangements that you want to make. However, in a Chapter 13 bankruptcy, you will have to list the relative or friend as a creditor and they will be treated equally to other similar creditors.

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Debts You Will Still Owe

After you complete your bankruptcy, you will receive your discharge. Debts that are "discharged" are cancelled out and you are no longer legally responsible to pay them. Some debts are not dischargeable and are not cancelled by bankruptcy. Examples of some of these debts are: domestic support obligations, such as child support or alimony; student loans unless you can demonstrate extreme hardship; debts involving fraud; certain taxes; criminal fines, penalties and restitution orders; and drunk driving injury claims.

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Student Loans

If your main debt problem is a student loan, bankruptcy probably will not help you. Student loans are dischargeable only after proving that you are unable to meet your basic living expenses and pay back the student loan. You must also prove extreme facts, such as disability or total lack of ability to work.

The treatment of student loans in Chapter 7 is simple. They are not discharged. In Chapter 13's, the way a student loan is handled varies by jurisdiction. In the jurisdiction where our firm practices, the Eastern District of Texas, student loans are treated just like any other unsecured debt unless you are in a 100% plan. What this means is that at the end of the bankruptcy, you will still owe your student loans in full, plus interest and will have to work out a payment arrangements.

For more information about student loans, an excellent web site is www.studentloanborrowerassistance.org.

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Before You File Bankruptcy: What to Do

The most critical thing you can do is consult with a bankruptcy attorney before you do anything with any assets or make any major changes. Pre-bankruptcy planning will help you to get the most relief possible out of the bankruptcy. Do not attempt to transfer or liquidate assets without getting advice from your bankruptcy attorney.

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Before You File Bankruptcy: What Not to Do

Once you consult with an attorney, you will know what is permitted or not permitted as far as a transfer of assets. Be very up front and honest with your attorney. He or she can't help you if they don't know what the situation is. Do not try to do anything sneaky, like transfer assets to a spouse or adult child. Even where you own nonexempt assets, there are many ways to still keep your property while being honest and staying within the law. What creates problems for people is not being up front; or being afraid of losing property and trying to hide assets. Once you know that you intend to file bankruptcy, do not make any additional credit charges.

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Choosing a Bankruptcy Attorney

Bankruptcy is a highly technical field. You should consider an attorney who specializes in bankruptcy and who has filed numerous bankruptcies. You will be spending a lot of time with this attorney, so be sure that you communicate well and like one another. Most bankruptcy attorneys offer a free, initial consultation where you can meet one another without obligation on both your parts. Find out how the attorney's office works – whether they handle a very high volume of cases and you will primarily be dealing with a paralegal, or whether you can expect most of your contact to be with the attorney; or somewhere in between.

At our office, the attorney personally handles each case. Your case will also be assigned to a paralegal who will handle administrative and routine matters, but all of the legal issues, including your questions on the law, will be personally handled by an attorney. All calls are returned that business day, if possible, but no later than 24 hours. Our goal is to treat our clients like we would like to be treated.

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Filing Bankruptcy Without An Attorney

My advice is: don't. Bankruptcy is extremely complicated. Filing without an attorney could cost you property, time and possibly the discharge. If you think I am prejudiced because I am an attorney, go watch the 341 Hearings for a day or two. While most of the cases are very routine and go quickly, every now and then, problems arise. This is most frequently seen in cases where people are representing themselves.

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If I file bankruptcy, I will lose my home and car and other property.

Most people DO NOT lose their property in bankruptcy. As far as your home and cars, as long as you are willing to continue making the regular monthly payment, you definitely will not lose these assets.

If you are behind on your payments, bankruptcy can help you get caught up with small monthly payments over an extended period of time. Depending on your circumstances, bankruptcy can also permanently LOWER your monthly payment, interest rate, and often even slash the principal balance.

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If I file bankruptcy, I’ll never be able to get credit again.

Most people who need to file bankruptcy are having credit problems anyway. Depending on how serious your credit problems are, you may actually see your credit improve in a year or so after bankruptcy.

Bankruptcy certainly adversely impacts your credit, however, it also stabilizes it. In other words, negative items are not constantly being refreshed on your credit report. The further in time you move away from the bankruptcy filing, the better your credit will be.

People who file bankruptcy are even eligible for FHA and VA financing for a home two years after filing bankruptcy. Bankruptcy can help you have enough income to actually pay all your bills in a timely manner.

While bankruptcy is a big negative factor, after bankruptcy, if you begin to pay all your bills on time, you will be able to rebuild your credit.

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After the new bankruptcy law in 2005, most people are not eligible to file bankruptcy.

While the much acclaimed BAPCPA law passed in 2005 did change many things about bankruptcy, most people are eligible to file either a Chapter 7 or Chapter 13. An extremely high wage earner may be limited to a Chapter 13 bankruptcy (reorganization), however, this is often the best choice anyway if you are trying to lower car payments, catch up on home loans, etc.

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Even if I file for bankruptcy, creditors will still harass me and my family.

Absolutely false. In fact, once you retain us, even as we are preparing to file bankruptcy, creditors will stop calling you and will call us, and we will handle your communication with creditors. This gives you immediate stress relief.

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Filing bankruptcy will make me feel guilty.

Many people struggle with guilt about filing bankruptcy. Unfortunately, circumstances can cause a person to get in a position where (if they are facing reality) they understand they cannot pay off all their debt. There is simply more money going out than coming in. The responsible reaction in this situation is to take care of yourself and your family, and consider bankruptcy as an option.

Some of the most successful people in history have filed bankruptcy, including Henry Ford, the former Governor of Texas, Donald Trump, and Walt Disney, just to name a few. This is the system of debt relief that our country has established. There is a Biblical basis for debt relief (the Year of Jubilee). Excessive debt is bondage. Even if your debt is caused from making mistakes or bad choices, living in bondage until death is not required. A fresh start is available!

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The biggest advantage to bankruptcy is that it stops all creditor harassment the instant the bankruptcy petition is filed. Often, we find our clients are suffering from stress, anxiety and depression due to merciless harassment by creditors. They often report receiving in excess of fifty phone calls per day; calls at work; embarrassing notes left at their homes; veiled and sometimes outright illegal threats.

Federal and state laws limit what a collector can do and say to collect a debt. If you are being mistreated and abused by debt collectors, you may have a case against the debt collector even if the debt is legitimate. Filing bankruptcy instantly stops all debt collection and creditor harassment. In fact, many of our clients receive relief from this persistent harassment once they retain us even before they file. When you are represented by an attorney, the creditor no longer has any right to contact you provided they have been notified of your representation.

Bankruptcy Stops All Lawsuits

When you file bankruptcy, the actually filing results in what is called the "automatic stay." What this means is that filing the bankruptcy automatically stops all creditors from being able to proceed with any type of action to collect the debt or take enforcement action. Bankruptcy also stops any pending foreclosure suit or sale, tax sales, tax levies and garnishments. One thing bankruptcy cannot stop, though, is child support collection.

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Credit Score After Bankruptcy

A bankruptcy filing is noted by various credit reporting companies. Federal law limits the length of time that this information may be carried on a report to ten (10) years. A bankruptcy shown on a credit report will adversely affect one's credit score. However, many of our clients have found that after filing bankruptcy, they can reestablish their credit score over a reasonable period of time by promptly making the payments that they are left with, such as their car, house, or rent payments. This and most of your other questions about bankruptcy can be answered in an appointment with one of our attorneys at no charge.

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Getting a Home Loan or Car Loan After Bankruptcy

Many clients come into our office with the belief that if they file bankruptcy; then they cannot obtain any credit for ten (10) years. Actually, your ability to obtain credit at any time is normally based upon three (3) factors:

1. your ability to repay the loan,
2. the creditor's collateral position, and
3. your credit history.

If you have filed a bankruptcy, then your credit history is clearly poor. This, however, does not mean that you cannot obtain credit. Individuals that show the creditor that they now have the ability to repay a loan can in many cases obtain the credit necessary to purchase a car. FHA and VA regulations provide that a person or persons can borrow funds to purchase a home provided that the discharge completing the bankruptcy occurred at least two years prior to approval of the loan and the borrower(s) meet the remaining necessary guidelines to borrow the funds to purchase a home.

Generally, the credit bureaus are permitted to report a bankruptcy filing for ten years.

People who have filed Chapter 7 bankruptcy actually tell us they are bombarded by credit card offers after their discharge.

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How Bankruptcy Affects Employment or Other Opportunities

Your employer and the government are prohibited from discriminating against you because you have filed for bankruptcy. Governmental and private student loan programs are also not permitted to discriminate against you because of a bankruptcy filing.

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Dealing with Bankruptcy Guilt

One thing we see in every person who walks through our door who knows they need to file bankruptcy is guilt and shame. No one wants to file bankruptcy. Remember: there is a difference in deliberately beating someone out of money you owe them, and in not being able to pay your debt. Taking care of yourself and your family has to be a priority.

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Credit Repair Companies

This is another high scam area. Companies that make promises about cleaning up your credit are out to clean out your bank account. There is no reason why you can't clean up your own credit. We offer detailed instructions in how to clean up your credit on our section on Credit Reporting.

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Unfortunately, one common thing we see is people will borrow money, run up credit card, and take out high interest loans trying to delay the inevitable. They will cash out nonexempt assets, such as a 401(k), and end up wasting money that would help them get back on their feet after bankruptcy.

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Chapter 13 and Loan Modifications

Many families are finding themselves in home loans that they cannot afford. There has been a lot of press about loan modification. This has lead to a number of crooked companies, especially internet companies, offering loan modification assistance to people. They are often advertised as "attorney assisted." Be very careful that you know who you are dealing with. There have been many scams and companies charging thousands of dollars for loan modification services that could be done through a free HUD-approved counselor.

President Obama has released some changes to the current loan modification program. For more information, visit www.financialstability.gov. The website indicates that you do not need an attorney or a loan modification company – there are counselors who are paid to walk you through the process. To be honest, the last loan modification program offered by the government was not successful at all. Most homeowners were not able to obtain a loan modification. If you want to try loan modification, you should not wait until the last minute to seek bankruptcy assistance if your home is being foreclosed. Many clients have come in thinking they were in the "loan modification process" and the next thing they knew, they received a notice of foreclosure sale.

We do handle loan modifications, but these are usually based upon legal problems with the loan, itself, not on the government loan modification programs. All of the loan modifications that our firm has handled have been negotiated after a careful analysis of the loan documentation. We identify problems with the loan, such as fraud, failure to give disclosures, etc., that entitle the borrower to actually cancel the loan. From there, we are able to either negotiate a settlement or else bring suit to obtain court relief, including loan modification.

If you are not comfortable handling your own loan modification case, or if you feel that you were deceived or defrauded in the loan process, we will be glad to consider your case, and you may call our office to schedule an appointment.

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Debt Management: Risky Alternative to Bankruptcy

With more people being laid off, having wages cut, and hours lowered, families are finding they can no longer keep up with their current debt level. Because people fear the consequences of bankruptcy, they often consider debt management. This is where you hire a company to "manage your debt." You pay them a certain amount and then they distribute it to the creditors. They try to get the creditors to lower their interest rates or to reduce the principle balances.

As with loan modification, be very careful about who you are dealing with. Check with the Better Business Bureau and the Texas Attorney General's office and make sure that if you go with debt management, the company you are dealing with is reputable. Make sure they have a local office so that you can hold someone accountable.

Also, keep in mind that most debt management companies take the first five to six months of your payment to apply strictly to fees without paying any debt. Many of my clients have paid thousands of dollars to debt management companies who collected the fee, but before the actual work began, the person was sued by a creditor, leaving them no choice but to file bankruptcy. They end up having to pay the cost of debt management and the cost of bankruptcy.

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Using Debt Settlement Company Instead of Bankruptcy

Again, this is another area full of scammers. For example, On March 28, 2009, the Texas Attorney General announced that a lawsuit was being filed against a Richardson debt settlement company, Credit Solutions of America. This company is accused of having debtors stop making payments to creditors, and then not being able to obtain reductions on accounts as they had promised their clients.

Just be careful here. Most likely, if a creditor is going to settle with you, you can negotiate this settlement yourself. You should also keep in mind that if you settle a debt, you are going to get a 1099 at the end of the year and may have potential tax liability. Check with your tax professional about the tax ramifications before entering into a settlement.

Another drawback of debt settlement is that your credit is hurt just about as bad as if you had filed bankruptcy since the debt will be coded as charged off.

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Foreclosure Rescue

I don't know what it is about crooks – they always seem to seek out people who are already hurting and in trouble to do their victimizing. There are many "foreclosure rescue" schemes out there. Do not believe someone is going to save your home from foreclosure without an agenda. If you are facing foreclosure and want to save your home, consult with an attorney immediately. If you receive an offer from an investor who offers to buy your home and rent it back to you or in any way, rescue you from the foreclosure, be sure you consult with an attorney and that you understand the terms of the deal.

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"Bancus Ruptus"

Bankruptcy has quite a history. The word "bankrupt" is thought to have come from two Latin words – "bancus" meaning table or bench; and "ruptus" meaning broken. In the early 1800's, merchants would sell their goods by coming to markets and setting up a table or bench displaying their goods. When they were unable to stay in business due to finances, the bench or table would be broken to symbolize they were no longer in business.

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No Debtor's Prison

Unlike some other countries, the United States does not have a debtor's prison. People do not go to jail for not paying their debts (except child support) unless some type of fraud or crime was committed. You can go to jail if you have given a lender false information to obtain a loan; or if you write a bad check.

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There Is Nothing New Under the Sun

In the colonial times, indentured servitude was common. Many settlers arrived as indentured servants and contracted to work as a servant for a set number of years, typically seven to eight. After their time was complete, the master would set the servant free. At first, the servants were usually given 50 acres of land, some basic farming implements, and this was a great way to make the jump from servant to landowner. This changed somewhat later though as greedy masters made it more difficult for servants to gain their freedom, and gave less incentive at the completion of their service. While we no longer have indentured servitude, the debt level that people are working to support is just another form of servitude.

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The Year of Jubilee

In Old Testament times, indentured slaves would serve for a set period, usually one year and then be set free. Poor people would sell themselves, their wives, and children into slavery in order to survive. They would often sell their land as well. The Torah (the first five books of the Bible) required though that redemption (purchasing back for the debt price) be permitted. Land was often sold for payment of debt, however, the Torah required that it be returned to the original owner after fifty years. The land this Year of Jubilee law applied to was farmland, or at least land not located within a walled city.

Essentially, if a person sold their farmland, it was like leasing it for fifty years, and both parties knew that it would return to the original owner in the Jubilee year. The price was set and paid according to how many years to the Jubilee Year. Putting this into perspective, however, a generation at that time was forty years, so it was indeed possible to lose your land for a lifetime. But your children's inheritance would be protected. This law also served to keeping great wealth from being amassed by a single person. Many people believe that modern day bankruptcy is the equivalent of the Year of Jubilee.

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• Credit Reports

• Taxes, Levies, and Liens, Oh My!

• Foreclosure

• Loan Modification

• Debt Settlement Companies

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Struggling with mortgage payments?

Foreclosures are at an all time high in this country. If you are behind on your house payments, and facing possible foreclosure, you are not alone.

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Non-bankruptcy options:

Non-bankruptcy options include strategies such as loan modification, loan forbearance, short sale or deed in lieu of foreclosure. If your loan has defects, such as violations under federal or state law with the way the loan was made, you may be able to sue the lender to obtain more favorable loan terms.

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Bankruptcy options:

Bankruptcy is also an option, and can be used to catch up on past due payments and completely stop foreclosure proceedings. In some cases, if you owe more than your home is worth, you may be able to strip off a second mortgage, paying only the first mortgage. Some people simply choose to “surrender” their home in bankruptcy if they owe a great deal more than their home is worth. Some people misunderstand bankruptcy and think you lose your home when you file. The opposite is true. Bankruptcy can help you keep your home if that is what is best for you and your family. There are many different ways bankruptcy can help a person who is delinquent and struggling to save his home.

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Watch out for scams!

Unfortunately, in these troubled times, scammers and schemers have come out of the woodwork to prey on vulnerable homeowners desperate for a solution. Federal and state authorities have been targeting numerous mortgage modification scams. The US Attorney General and various federal and state authorities are reporting huge increases in scams targeting distressed homeowners. So be careful. Know with whom you deal. Be especially cautious in dealing with virtual companies (no local office). Check with the Texas Attorney General’s Office and the Better Business Bureau.

The time involved in the foreclosure process is extremely short. The sooner you act, the more options you will have.

If you are behind on your house payment, a reputable, local attorney experienced in foreclosure defense can give you all your options.

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Procedure for Foreclosure in Texas

There are two types of foreclosure in Texas, judicial and non-judicial. Judicial foreclosure means suit must be filed before the home can actually be foreclosed. Non-judicial means that the lender is only required to follow a specific procedure for foreclosure to take place, but no court action is required.

Several different things determine when the lender is required to use judicial versus non-judicial foreclosure. Judicial foreclosure is required in all loans that come under “home equity loans” as defined by the Texas Constitution. While not typical, judicial foreclosure can also be required by your particular deed of trust. Most deeds of trust will provide for non-judicial foreclosure though unless the type of loan mandates judicial foreclosure.

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What type of notice is required in order for a home to be foreclosed?

Foreclosures in Texas always take place on the first Tuesday of the month. As a general rule, the lender must first give a demand to cure. The homeowner must be given no less than twenty (30 days is average) to come up with the money owed, “cure.” Assuming the foreclosure is on the borrower’s principal residence, this notice must be by certified mail to each of the debtor’s on the note.

If the homeowner fails to cure, a second notice must be given, the posting notice, which actually states the date and place of the foreclosure sale. This notice also accelerates the obligation and gives a minimum of twenty-one days notice of the foreclosure sale date. In addition, the lender is required to post the notice of foreclosure at the courthouse or other usual place of posting foreclosures. The lender also files a copy of the posting notice with the court clerk, but it is not required to be filed in the land records.

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The Texas Supreme Court has held that actual receipt of the foreclosure notice is not required. All the lender has to do is place the certified notice in the mail. If the post office messes up and you don’t receive the notice, the foreclosure may still be valid. Some people think that if they reject or don’t pick up the certified mail, this will somehow make the foreclosure invalid. This is not true.

If you are late on a mortgage payment, don’t count on receiving a notice. Check the foreclosure postings. When you get a notice, don’t wait and try to work it out with your lender. Immediately consult an attorney. It will take time for any attorney to prepare the paperwork and help you in the event that you need to file suit or file bankruptcy. If you wait until the last minute, you may not be able to find an attorney who can drop everything and give you the help that you need.

In general, the entire foreclosure process takes about 60 days from when the homeowner receives an initial demand.

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Are there any defenses to foreclosure in Texas?

There are many defenses to foreclosure, including common law fraud, violations of the Truth in Lending Act, the Home Ownership Protection Act, and the Texas Home Equity Act. Your original loan documents, as well as any documents that you have received in the foreclosure process are key. While there may be a very limited exception, in general, once the foreclosure occurs, and especially if the home is purchased by a buyer at the foreclosure sale, you will probably not be able to set aside the foreclosure.

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Is bankruptcy a defense to foreclosure?

No, but bankruptcy stops the foreclosure from proceeding provided you file before the sale occurs and give proper notice to the proper parties. When you file bankruptcy, a stay order is issued stopping any collection action, including a foreclosure from going forward. Filing bankruptcy may give you the time to either negotiate a workout, and is often an effective way to catch up on a mortgage arrearage. Often, homeowners get further and further behind because the lender won’t take partial payments once the homeowner gets behind. Bankruptcy can be used to force the lender to work with the homeowner and allow him to catch up over time.

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Can a homeowner catch up the past due payments any time before the sale?

Typically, a lender will allow this, but they may not have to allow it. In these tough economic times, most lenders don’t want more unsold homes back in their inventory. But do not count on this. The controlling factor is what the trust deed states the lender has to do. Many provide that the homeowner may cure by catching up five days before the sale date.

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Assuming that a homeowner is current on the note, are there other reasons that a lender can foreclose?

A homeowner has other obligations under the typical deed of trust and note. For example, the borrower/homeowner may be required to keep insurance in effect and may not be permitted to sell the property. Failure to keep insurance or trying to sell “by owner” without refinancing the underlying obligation can result in a lender taking foreclosure action.

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If my home is sold at foreclosure, do I still owe the debt?

When a home is sold at foreclosure, it often brings less than the amount owed on the mortgage. This is referred to as a “deficiency.” If the loan is a home equity loan, then the lender may not recover the deficiency from the homeowner as there is no personal recourse or liability on a home equity loan. However, in other types of loans, the homeowner may be sued for the deficiency provided suit is timely brought (2 years from date of the foreclosure sale). If sued on a deficiency action, the borrower may request that the court determine the value of the property on the date of the foreclosure sale. If the court’s value is greater than what the property was purchased for at the foreclosure sale, the court’s value is used in determining the amount of the deficiency judgment.

What are my options if I receive a notice of foreclosure?

If you are not paying your mortgage and you receive the Demand to Cure and the Posting Notice, you have limited options. You may file bankruptcy or you may file suit to enjoin the foreclosure sale. You should act immediately. Do not fall for any “foreclosure rescue” scams. Get professional help.

For information about what and how foreclosure laws apply in your particular case, send us a message online or call 903 759 5922. We represent individuals in Gregg, Harrison, Cass, Camp, Marion, Morris, Rusk and Upshur Counties and surrounding areas.

We are providing some general, education information about foreclosures in Texas. This information pertains to residential foreclosures (homes where the borrower actually lives). This information is intended to provide only general information and should not be construed or relied upon as legal advice. For information about your particular situation, you should consult an attorney. If you are dealing with foreclosure, you should consult an attorney immediately!

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One option if you are behind, but have not been mailed a foreclosure notice by your lender is a loan modification. Many of the major lenders are now offering various loan modification programs. There is also a private sector alliance of mortgage servicers who are participating in a loan modification program called HOPE NOW.

As of this writing, eligibility requirements for the streamlined version of HOPE NOW are:

1. Your lender must be a participant in the program;
2. You must be 90 days or more behind on your loan;
3. Your loan to value ratio must be 90% or higher. This means you must not owe more than 90% of your property's value.
4. If you participate in the program, you are required to escrow your taxes and insurance.
5. You must provide documentation, including a hardship statement, verification of monthly income, and a signed loan modification agreement.

To receive more information on your eligibility for HOPE NOW, CALL 888-995-HOPE.

If you need assistance in applying for a loan modification, call us at 903-759-5922 today to schedule an appointment to discuss your particular situation.

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Discharging Taxes in Bankruptcy

Bankruptcy can stop tax enforcement action, such as bank account levies, seizures and wage garnishments. The automatic stay applies even against governmental entities that are trying to collect.

While not all taxes are dischargeable, bankruptcy can be a tool for establishing a reasonable payment plan where you can pay back taxes without fear of your accounts being levied or wages being garnished. For example, a Chapter 13 can be used to pay back taxes over five years in an orderly manner (along with other bills).

What follows is general information on a complex topic. For information about your tax problem, call us: (903) 759-5922.

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What taxes can be discharged in bankruptcy?

Certain taxes, such as payroll taxes or trust taxes, are not dischargeable. Income taxes may be dischargeable depending on a number of factors, including:

1. When the tax was due;
2. When the tax return was filed; and
3. When the tax was assessed.

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Are interest and penalties dischargeable?

As a general rule, if the tax is dischargeable, so are the penalties and interest.

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What effect does a tax lien have on payment of taxes through bankruptcy?

Taxes that normally would be dischargeable are not discharged to the extent that they are secured by equity in property, regardless of whether the property is exempt or not. What this means is that the IRS can still collect taxes that are secured by a properly filed tax lien.

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How long does the IRS have to enforce a tax lien?

As a general rule, the IRS has ten years from the date the tax was assessed to enforce a lien.

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Are there any alternatives to dealing with past due taxes besides bankruptcy?

Of course. If the only debt you have is tax debt and the threat of levy or garnishment is not immediate, there are several other options, including:

1. pay the tax;
2. do a voluntary installment plan;
3. dispute or litigate the tax liability;
4. negotiate an offer in compromise;
5. have the taxes determined to be non-collectible;
6. do nothing until the statute of limitations runs; not a great option if you have assets which may be seized.

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Can I file bankruptcy without having filed my tax return?

Yes, you can file bankruptcy without having filed your tax returns, but you will need to make sure you have them filed by the Meeting of Creditors (typically 30-60 days after the petition is filed). Under the Bankruptcy Reform Act of 2005, the debtor is required to have filed the last four years of tax returns in order to receive a discharge.

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Will I lose my tax refund if I file a Chapter 13 or Chapter 7 bankruptcy?

If you file around the first of the year when you have a refund due to you, but you have not received it, you must have available exemptions to protect the tax refund in a Chapter 7. In a Chapter 13, you must have available exemptions, and you must be counting the tax refund as income necessary for your support in your budget.

Normally, with planning, you will not lose your tax refund. Generally, it is not a good idea to overwithhold, even if you receive earned income credit. The best thing to do is to learn to budget and actually withhold close to what you will be paying in taxes. If you are entitled to an earned income credit, you adjust your withholding to receive your earned income credit throughout the year as well.

You may lose your refund, however, if you owe a domestic support obligation or if you owe the IRS for taxes that were incurred before the petition was filed.

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Property (Ad Valorem) Taxes

Taxes on your home are dischargeable only as far as your personal liability provided they were incurred more than a year before the bankruptcy. The house, itself, however, remains liable for the taxes. A lien arises by operation of law, automatically, and the house stands good for the taxes. If you are behind on property taxes, you may catch up through a Chapter 13 Plan by paying monthly. The taxing entity is entitled to interest. The current interest rate is 12%.

There can be special treatment for homeowners who are over 65 or disabled. The house still stands good for the taxes, but if the appropriate paperwork is filed, the tax can be deferred and the taxing authorities cannot proceed to collect the taxes. If you are disabled, the delinquent interest rate is 8% instead of 12% and you may pay the taxes quarterly without a penalty. For the disabled person, keep in mind that there is also a special exemption for disabled people which lowers your tax bill. You will need to bring your social security disability letter or other proof of disability to the chief tax appraiser. This is an important exemption to file because it will also cap the assessed value of your home, which will keep your taxes from going up should your house value increase.

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There is no guarantee that the debt settlement company will be able to settle your debts by reducing principal or interest. If your debt is partially forgiven, you could have tax liability on that portion of the debt that is forgiven. You will receive a 1099 at the end of the year for the difference between what you owed and what the debt is reduced to by the forgiveness. This could be taxable income to you. In addition, most debt settlement companies will charge you a percentage of the reduction as an additional fee.

Extreme care should be taken before signing up for one of these programs. Make sure they are reputable and understand how your monthly payment is going to be allocated and what fees you will be paying. Consult with an attorney and compare your options, both bankruptcy and nonbankruptcy.

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What do I bring to my first appointment?

For Bankruptcy, you should bring:

• A list all your debts, even if you want to keep paying that creditor.
• Copies of recent pay stubs, L.E.S., etc... or if you are self-employed, copies of profit and loss statements showing income and expenses.
• Any paperwork related to anything you have specific questions that need answering.
• Any garnishments, bank levies, notices of default, or foreclosure, judgements, etc.
• Copies of documents related to your secured loans (i.e. loans with collateral that can be repossessed if the loan is not paid)
• Please complete and bring the appropriate worksheet with you to our meeting. The release on the worksheet giving the Law Office of Carol Cross Stone, PLLC, the authority to obtain information about your loans does not need to be signed unless you are sure you want to proceed.

If you do not own a business, download the Consumer Bankruptcy Worksheet.

If you own a business, download the Business Bankruptcy Worksheet.

If you own a business and it is incorporated or in the form of a limited liability company, download the Business (LLC or Incorporated) Bankruptcy Worksheet.

To view these documents, you need a PDF Reader program, such as Sumatra PDF Viewer or Adobe Reader.

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Overview

"A good name is more desirable than great riches; to be esteemed is better than silver or gold." -Proverbs 22:1

In this modern world, the credit reporting agencies (Equifax, TransUnion and Experian) exert a tremendous amount of control over our good names with respect to our finances. Unfortunately, these giant credit crunching machines make many errors, potentially damaging a person’s ability to obtain financing, favorable insurance and loan rates, and even employment.

Federal law called the Fair Credit Reporting Act (FCRA) sets out the duties and responsibilities of the credit bureaus (called credit reporting agencies in the FCRA) in issuing credit reports. The FCRA also sets out the responsibilities of the companies, such as debt collection agencies or creditors (called furnishers), who furnish credit information to the credit reporting agencies.

Importantly, this law explains to consumers how to dispute inaccurate, misleading, or false information. If a consumer follows this procedure, and the consumer reporting agency or the furnisher fails to correct erroneous information, the law provides for damages and correction by court order.

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In a nutshell, to correct credit report errors, the consumer is required to follow a specific procedure to dispute inaccurate information. The consumer reporting agency has 30 days to verify the disputed information with the furnisher. If the furnisher of the information fails to verify the item, the consumer reporting agency must remove the entry from the credit report.

If the information is verified, the credit bureau must advise the consumer in writing that the furnisher has verified the information, and it will continue to be reported.

If the consumer reporting agency is unable to verify the information or if the furnisher advises there is an error, the consumer reporting agency is required to delete this information and to advise the consumer in writing that the information is being deleted.

If the consumer reporting agency advises the consumer that the information is verified and will not be deleted, the consumer may request a reinvestigation. Again, there is a specific process for doing this. Both the consumer reporting agency and the furnisher must reinvestigate the dispute. Once the reinvestigation is complete, the credit bureau must notify the consumer that it is deleting the information, or else confirm that they reinvestigated and found the information as accurate.

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The consumer reporting agency and the furnisher must consider any documentation furnished by the consumer that challenges the validity of the erroneous information. Often the consumer reporting agency and furnishers fail to conduct more than a cursory investigation, and sometimes conduct no investigation. This can result in potential damages, both actual and punitive, as well as attorney’s fees and costs to both the consumer reporting agency and the furnisher.

Under the FCRA, the consumer reporting agency must follow reasonable procedures to provide accurate credit reports. Failure to do so may result in the consumer reporting agency’s liability for actual and punitive damages where warranted. Attorney’s fees and expenses are also recoverable in a successful FCRA case.

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How do I obtain a copy of my credit report?

Unless you are filing bankruptcy or have some other urgent deadline for immediately obtaining a copy of your credit report, we recommend that you obtain a copy of the order form and print it out, fill it in and mail it. You may download the written form from:

https://www.annualcreditreport.com/cra/order?mail and mail it to the address on the form.

This does take longer and is more trouble than ordering the report on-line. It is still free and is a much better record of your attempts to correct errors. If you use the on-line process, you will not have a clear paper trail of what the credit reporting agencies were reporting at a certain point in time.

The on-line form also requires the consumer to agree that if there is a dispute about the credit report and you end up having to sue the consumer reporting agency, you are waiving your right to a jury trial.

Under the FCRA, every consumer is entitled to one copy of his credit report from each of the Big 3 credit reporting agencies each year. The FTC warns to be cautious about impostor sites, so be sure to carefully type in www.annualcreditreport.com. You can also go directly to the Big 3 sites to obtain a copy of your credit report and request a form for ordering your report which you mail in to the address on the form. You will pay from $8.00 (for a basic report of one bureau) on up depending on what you request.

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To dispute errors on the report, send certified letters (return receipt requested) setting out the errors and requesting correction to the consumer reporting agency at the following addresses:

Equifax
P.O. Box 740241
Atlanta, GA 30374
1-800-685-1111
www.equifax.com

TransUnion
P.O. Box 2000
Chester, PA 19022
1-800-916-8800
www.transunion.com

Experian
701 Experian Parkway
Allen, TX 75013
1-888-397-3742
www.experian.com

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Are there other situations where I might be eligible for a free report?

You are also entitled to a free report if you have adverse action taken against you based on a report from the consumer reporting agency, such as credit or employment being denied; if you are unemployed and plan to look for a job within 60 days; if you are on welfare or if you are the victim of fraud, including identity theft.

You have 60 days after receiving notice of the denial to request your free report. If you are denied credit or employment, you are supposed to be given a written notice detailing which consumer reporting agency report was relied upon in making the decision to deny you credit or employment. You have 60 days to request your free copy of the report.

Again, we strongly recommend you order your report by mail, making a clear document trail should a problem arise that you are not able to easily repair.

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How do I make my credit report better?

No one can make any of the credit reporting agencies delete timely, accurate information. However, you can force the credit bureau to remove dated, erroneous, or misleading information, substantially improving your credit.

The credit reporting agencies may not report negative information about your credit, even if it is truthful, for more than seven years. The exception to this is Bankruptcy which may be reported for ten years from the date of the Order for Relief or the Adjudication. While the Fair Credit Reporting Act permits this reporting, most often the credit bureaus begin the ten year countdown from the date of the filing of the Petition.

The credit reporting agencies may not report incorrect, derogatory information. Additionally, convictions of a crime may be reported as long as they remain public record. With respect to debts which you have been unable to pay, the seven years begins to run when they are turned over for collection, internally or to a third party or when they are charged off. If the creditor does not turn the account over for collection or charge it off, the seven years begins to run 180 days from when the account becomes delinquent.

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Should I hire a Credit Repair Company to assist me in improving my credit report?

Unfortunately, many credit repair companies are rip-offs, but certainly not all companies. A credit repair company is not going to be able to do anything that you cannot do yourself. However, if you want someone else to dispute false, derogatory information, you can use a credit repair company. Just be sure you know they are a reputable company.

Beware of a company that claims to be able to assist you in removing timely, accurate data from your report. We provide the forms on this website for you to handle the initial dispute. There’s a mistake on my credit report, how do I fix it? We can also assist you if you desire, but obviously, we charge for our time. The fee varies depending on the complexity of the case, however, we do offer an initial one hour consultation for $175.00.

If disputing the error does not result in correction of a legitimate error, we may be able to represent you in a suit against the credit bureau(s) or the creditor or both. We handle these types of lawsuits on a contingency basis, which means we do not charge you an attorney’s fee unless we win your case, and then we charge a percentage of what we are able to collect for you in damages.

Attorney’s fees may also be awarded, in which case, you will get a credit for any fees paid by the defendant against the percentage we charge for your award. We may require that you pay court costs and expenses, such as court filing fee, expert witness fees. We will estimate what your out of pocket costs will be at your initial consultation.

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There’s a mistake on my credit report. How do I fix it?

STEP 1: Obtain your report

Order your credit report from each of the credit reporting agencies.

Follow the instructions in the section above: How do I obtain a copy of my credit report?.

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STEP 2: Review your report

Once you receive your report, review each item and make sure it is accurate. For each debt listed, consider:

• Is the debt mine?
• Is the amount showing owed accurate?
• Is the debt over 7 years old?
• If you filed bankruptcy, is the bankruptcy more than 10 years old?
• If you have filed bankruptcy, is the debt showing a zero balance and that it was discharged in bankruptcy?
• Is the report showing a bankruptcy that is not mine?
• If the debt is showing that it was paid late, is that accurate?
• Was the debt paid late?
• Is the same debt being reported more than once?
• If a public record, such as a tax lien, is showed, and you have paid it, is it showing that the lien is paid?

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STEP 3: Send dispute / challenge letters to agencies

For debts which are inaccurate, send a letter disputing or challenging the item to each of the credit reporting agencies that are reporting the item.

Download sample letter to the Credit Bureau.

You should specify why you are challenging the item, i.e. the debt is not yours, the amount is wrong, etc. This letter should be sent by certified mail, return receipt requested. You should keep a copy of the letter and the green card where the credit bureau signs acknowledging receipt of the letter for your records.

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STEP 4: Send dispute / challenge letters to creditor or furnisher

For debts which are inaccurate, send a letter to the creditor or furnisher of information disputing the item they are reporting to the credit bureau.

Download sample letter to Furnisher.

Again, specify why you challenge the disputed item, attach documents establishing your identity, proof that supports your position where available, and send the letter certified mail, return receipt requested.

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STEP 5: Confirm that information is deleted

If the credit bureau(s) response is that the information is being deleted, request a fresh credit report by mail (not online) and confirm that the information has been deleted.

If the consumer reporting agency responds that the information you disputed is being deleted, request your credit report again in 30 to 90 days, and again before applying for credit, insurance, or employment to be certain that the information does not reappear.

In some cases, the error returns for various reasons. Sometimes, the credit reporting agencies will cloak or cover up the erroneous information for a certain period of time. If the original creditor re-reports the erroneous information after the cloaking time is up, the error can reappear. You need to consult with an attorney who is experienced in Fair Credit Reporting Act cases. Call or email us for further assistance.

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STEP 6: If erroneous information continues to be reported...

If you follow the above procedures, and erroneous information continues to be reported or the credit bureau or creditor/furnisher refuses to delete the information, contact our office.

If you are unable to get the credit reporting agencies to correct the problem by following this process, or if you are able to get the error corrected, but then it returns, you should call or email us right away. There are time deadlines, so do not delay.

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I have tried to fix error(s) on my credit report. But they are either not corrected or are temporarily corrected and then return. What do I do?

Contact an attorney with experience in credit reporting cases.

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I filed bankruptcy. I am trying to improve my credit score. What do you suggest?

Obviously, the first thing you need to do is obtain a copy of your credit report from each consumer reporting agency to see what is being reported. See the above section for instructions on how to obtain your credit report.

One common problem for consumers who have filed bankruptcy is that the consumer reporting agency will report that the consumer has filed bankruptcy, but will also show the debts discharged in the bankruptcy to be still due and owing, adversely affecting the consumer’s credit score. See the above section on Fixing Mistakes on Your Credit Report and follow the Steps to correct your credit report. As part of pre-bankruptcy counseling, we will give you ideas and tips that will speed the restoration of your credit score.

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I co-signed on a debt. The debtor has filed bankruptcy. The bankruptcy is showing up on my credit report. What do I do?

You should follow the steps to correcting your credit report in the above section: There’s a mistake on my credit report. How do I fix it?.

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I am having trouble fixing my credit. Should I hire a Credit Repair Agency?

If you can find a reputable credit repair agency and do not want to handle the matter yourself, this may work for you. However, use caution in hiring any agency. With some effort and diligence, you can follow the steps outlined above to correct your own credit report. We do offer this service at varying prices. Please contact us for more information.

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Do I need a lawyer to help me fix my credit?

Maybe. Many people are comfortable handling the initial dispute themselves. We have tried to provide information to guide you in handling the initial dispute process yourself. In the many cases, this will correct the problem.

You need a lawyer if you follow the proper procedure and the credit reporting agencies do not correct the problem or if the problem reoccurs after you have gone through the dispute procedure and received written notice from the consumer reporting agency that the disputed item is deleted.

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What is a FICO Score, and why do I care?

A FICO Score is a Fair Isaac Corporation score based on a computer generated model and certain factors which affect scoring. A complex computer program determines your score starting with a low of 300 and a high of 850. This score is important as it may be used to determine loan rates, credit availability, and insurance rates among other things.

Making sure that your credit report is accurate and does not contain old, derogatory information may greatly improve your score. FICO Scoring is one of several computer models used to determine a person’s credit worthiness for purposes of rating risk factors.

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Someone has stolen my identity! Help!

Don’t panic. But more importantly, do not procrastinate. Take the following action immediately. Research has shown that the quicker a victim of identity theft acts, the less damage is done and the easier it is to avoid a big, tangled mess.

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STEP 1: File a police report.

You need to file a police report where the identity theft occurred. Be sure to obtain a copy of the report as you may need to provide it at some point in the future. Texas law does require peace officers to make a written report when a consumer complains of identity theft. You are also entitled to a copy of the report.

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STEP 2: File a Fraud Alert with one of the major credit reporting agencies.

You need to file a fraud alert with one of the Big 3 (Equifax, TransUnion, or Experian). The law has a “one-call” provision so that you are required to call all consumer reporting agencies. If you report a fraud alert with any one of the Big 3, they have a duty to notify the other bureaus of the fraud.

Once you file a fraud alert, any reports that are released by the credit reporting agencies are required to contain the fraud alert for a minimum period of 90 days unless you request that the fraud alert be removed. The fraud alert may be extended for a period of up to 7 years at your request. Under Texas law, the fraud alert may be extended by the consumer indefinitely for 45 day periods at a time, and this may be done by telephone provided the consumer provides property identity. We recommend, however, that you follow up with all telephone requests in writing, certified mail, return receipt requested.

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The credit reporting agencies may not include you on any consumer lists sold to third parties for the purpose of soliciting credit or insurance for 5 years. While you only have to contact one of the Big 3, the contact information for the fraud alert for each of the credit reporting agencies is:

Equifax fraud department:
(888) 766-0008
Web: https://www.alerts.equifax.com/AutoFraud_Online/jsp/fraudAlert.jsp

Experian fraud department:
(888) EXPERIAN (888-397-3742)
Web: http://www.experian.com/fraud

TransUnion fraud department
(800) 680-7289
Web: http://www.transunion.com/corporate/personal/fraudIdentityTheft/fraudPrevention/fraudAlert.page

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Under Texas law, the consumer reporting agencies must maintain a toll free line for fraud alerts to be answered during normal business hours. After hours, there must be voice mail, and the call must be returned within two hours of the start of the next business day.

Once a fraud alert is included in your report, generally, creditors are put on notice of a potential fraud problem. But more importantly, the law requires that they exercise reasonable measures to ensure the identity of the person they extend credit to who has a fraud alert on their credit report.

Also, within four business days, the consumer reporting agency must block reporting of any information that the consumer has identified as being fraudulent. The consumer must provide an identity theft report. Under Texas law, the consumer reporting agency must tag the credit report with a fraud alert within twenty-four hours of the fraud alert request.

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CONSIDER A SECURITY FREEZE

You may also request that your credit accounts be frozen under the Texas Security Freeze Law. To obtain a Texas Security Freeze, you must request a freeze by certified mail, return receipt requested. You must provide proof of your identity, your social security number, your birth date and other pertinent information.

The consumer reporting agency must provide in writing to the consumer within ten business days a confirmation that the freeze has been placed on the account. Additionally, the consumer reporting agency must provide a personal identifier or password for the consumer’s use in accessing information about the file. This can be used by the consumer to authorize a removal or temporary lifting (by telephone) of the security freeze.

There is a charge of approximately $10.00 to $12.00 per consumer reporting agency and each credit bureau must receive a separate letter. Requesting a security freeze differs from a fraud alert in that it is stronger and prevents anyone from accessing your credit file until you authorize the consumer reporting agency to release your report. This does not apply to existing creditors rights to periodically access your accounts.

You will have to weigh the risk of potential havoc from the identity theft against the inconvenience of not being able to apply for new credit, employment, an apartment, etc. until the freeze is lifted. You can have the freeze lifted either for a specific time or for a specific creditor, but there may be a charge of approximately $10.00 to $12.00 per consumer reporting agency.

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STEP 3: Cancel any accounts that you know have been compromised.

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STEP 4: Check for recent inquiries, new accounts, or other unusual activity.

Obtain a copy of your credit report and check for recent inquiries or new accounts opened without your knowledge or other unusual activity.

Examine your credit reports carefully. Look for any recent inquiries or new credit accounts. Take action (See section above: There’s a mistake on my credit report. How do I fix it?) to remove any accounts that are not yours. Save copies of all documentation and send everything return receipt requested. You are also entitled to two free credit reports per 12 month period from each of the Big 3, instead of one per year.

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STEP 5: File a complaint with the Federal Trade Commission.

You may contact them by phone at 877-438-4338 or write:

Federal Trade Division
600 Pennsylvania Avenue NW
Washington, DC 20580

For more information, go to www.FTC.gov.

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Our firm charges based on factors such as:

• Whether you are a below or above median debtor;
• The number of creditors you have;
• The number and type of assets you have;
• Potential non-dischargeability issues;
• The number of reaffirmation agreements required;
• Whether any debts are secured by a voidable lien, requiring a court order to void lien;
• Whether you have judgments against you that have attached to your real estate and require a motion to void judgment lien;
• Extent of tax debt;
• The level of service you need, such as credit report reviews, etc.

While we try to be competitive and fair in our fees, each case is treated individually. We understand that most people who need to file bankruptcy are cash-strapped.

Once you retain our firm, we will handle your creditor calls. Most people stop paying unsecured debt or creditors secured by property that they do not want to retain in the bankruptcy. This frequently helps them be able to afford the bankruptcy fee.

The most accurate way to determine how much it would cost you to file Chapter 7 would be to receive a free initial bankruptcy consultation. An experienced attorney at our firm will review your case and give you an idea of whether bankruptcy is the right option, how much it would cost, and how it could benefit you.

To speak with a bankruptcy attorney:

• Call our office: (903) 759-5922
• Complete a Bankruptcy Evaluation, or
• Send a quick message with our Contact Us form.

The simplest way to qualify for a Chapter 7 bankruptcy is to be able to prove that you are a below median debtor. This means that your family income is below average for the state of Texas.

Currently (as of September 2009), the average income in the state of Texas is as follows:

Family Size Income Level
1 Person $38,545
2 Person $54,908
3 Person $57,053
4 Person $66,400

Even if your income is higher than average (over median), you may still qualify for Chapter 7 if you have sufficient expenses. You do have to itemize your expenses and the law determines what expenses you may use. Examples of expenses that tend to lower your income are a large house payment, large on-going medical expenses, domestic support obligations, such as child support or alimony to name a few. Do not automatically assume that because your income is over median, you do not qualify for Chapter 7 bankruptcy.

You may also still qualify if your income has recently changed and you will not be earning what you have in the past. If this is your situation, sometimes it is best to wait until a few months go by which lowers your average income for the look-back period. Depending on what factors are pressing you to file, such as tax garnishment, lawsuit, etc., timing the bankruptcy may be important. With the large number of layoffs, we are seeing more people who are laid off and on unemployment benefits, workers who are no longer receiving overtime or bonuses, and people who were high wage earners who are now unemployed.

Consulting a knowledgeable, experienced bankruptcy attorney is critical. Pre-bankruptcy planning is often needed to maximize both your deductions and to make certain that all of your assets are protected. Most importantly, Chapter 7 bankruptcy is a big decision and has a major life impact. You want to obtain all of the available relief, and truly obtain a fresh start.

To speak with a bankruptcy attorney:

• Call our office: (903) 759-5922
• Complete a Bankruptcy Evaluation, or
• Send a quick message with our Contact Us form.

• Our firm charges based on factors such as:
• whether you are a below or above median debtor;
• the number of creditors you have;
• the number and type of assets you have;
• potential non-dischargeability issues;
• extent of tax debt;
• complexity of Chapter 13 Plan.

While we try to be competitive and fair in our fees. Each case is treated individually. We understand that most people who need to file bankruptcy are cash-strapped. In a Chapter 13, we often only require a small down-payment, and the balance of the attorney’s fee is paid through the Chapter 13 Plan.

To speak with a bankruptcy attorney:

• Call our office: (903)-759-5922
• Complete a Bankruptcy Evaluation, or
• Send a quick message with our Contact Us form.

Being sued by a creditor is stressful, costly and embarrassing. A lawsuit often forces people to file bankruptcy to stop the lawsuit and keep a judgment from being entered. If you have been served with suit papers, you must answer and defend the suit. If you do not answer (file papers responding to the lawsuit) and successfully defend the suit, a judgment will be entered against you.

If you have a valid defense to a lawsuit, you may need to hire an attorney to assist you in raising those defenses. Examples of valid defenses are:

1. Statute of limitations - in general, the statute of limitations on most debts in Texas is four years. The four years normally begins to run from the date the last debt payment was due or the date the last payment was actually made. Old debts are often sold to debt buyers who attempt to collect well beyond the statute of limitations.
2. Debt previously satisfied - we often see people who are sued on old debts that they have compromised and settled. They frequently do not have a written agreement or do not keep proof of satisfaction of the debt.

By raising a valid defense, you may be able to win the lawsuit and not have to file bankruptcy to keep a judgment from being entered against you.

Once the creditor suing you takes a judgment, it can levy on your bank accounts and other non-exempt assets to collect the judgment. In Texas, in most circumstances, the judgment creditor cannot take your homestead, however, the judgment still attaches to your property. The judgment will cloud your title and prevent you from doing such things as refinancing and conveying the property in certain circumstances. You may be able to sell your homestead, however, you would have a limited time to reinvest the proceeds in a new homestead or the proceeds of the sale may be seized to satisfy the judgment.

What if I already have a judgment against me?

If you already have a judgment against you that is impairing an exemption, bankruptcy can usually be used to remove the judgment. This does require an extra procedure by your bankruptcy attorney and will usually cost extra, but it is absolutely necessary to clear up the judgment so you can obtain your fresh start.