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CHAPTER 7 - Debt Elimination or Straight Bankruptcy

Chapter 7 is commonly thought of as that portion of the Bankruptcy Code that provides debt elimination. Your non-exempt assets are liquidated to satisfy creditor claims. Inheritances, lottery winnings, bank accounts, stocks and bonds are examples of non-exempt property.

Certain debts may not be discharged and include:

• Creditors not listed on the bankruptcy schedule or did not get a notice of the bankruptcy;
• Student loans;
• Responsibility for injuries caused to others while driving while intoxicated;
• Most alimony and child support payments;
• Certain taxes;
• Debts to a creditor who can prove fraud when you obtained credit.

Texas exemptions include:

• Your urban or rural homestead your purchase money lien, home improvement loans, home equity lien and property tax liens may not be discharged. You must continue to pay these loans or you may lose your property in foreclosure;
• Up to $30,000 value for a single person or $60,000 for a family of the following;
  • Home furnishings and family heirlooms;
  • Provisions for consumption;
  • Farm or ranch equipment and vehicles;
  • Tools, equipment, etc. used in a trade or profession;
  • Clothing
  • Jewelry not to exceed 25% of the limitation;
  • 2 firearms;
  • Athletic and sporting equipment;
  • A vehicle for each family member who drives or who relies on someone else to drive;
  • The following animals and their food;
    • Two horses, mules, or donkeys with a saddle, blanket and bridle for each;
    • Twelve head of cattle;
    • Sixty head of other livestock;
    • 120 fowl.
  • Household pets;
  • Present value of life insurance to the extent a family member or dependent of a single insured adult claiming the exemption is the beneficiary.

Additionally, and not included in the $30,000 or $60,000 limit are:

• Current wages;
• Prescribed health aids of debtor or dependents;
• Unpaid commissions not exceeding 25% or the $30,000 or $60,000 limit;
• Money benefits, including cash values to be paid under an insurance policy or annuity contract;
• Stock bonuses, pensions, profit sharing annuities, and IRAs may be exempt if they fall under the provisions of the Internal Revenue Code;

OR, you can claim the Federal Exemptions listed in Section 522 of the Bankruptcy Code. You CANNOT claim both the Federal and Texas Exemptions.

You do not have to discharge all non-exempt liens if they secure property you want to keep. You have a choice to keep the property, reaffirm the debt, and continue to make your payments.

If a loan is secured by household goods or tools of the trade, but that money received in the loan was not used to purchase those goods or tools, it may be possible to discharge the lien without returning the property.

For more information, please schedule a FREE INITIAL CONSULTATION.

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email cheryl@riverasmith.com