Texas debtors who are considering bankruptcy may wonder what chapter 7 bankruptcy entails. The chapter, also known as liquidation, involves the selling off some of the debtor's property and assets in order to pay a small portion of the owed debt. Texas law does exempt certain categories of property from liquidation, so although debtors may lose some property, they will also be allowed to retain some as well.
The first step in court is the debtor filing the bankruptcy petition. In addition to the petition, the debtor will have to pay a $245 filing fee, a $75 miscellaneous administrative fee and a $15 trustee surcharge. Some debtors are able to pay the fees in four installments, while those who are deemed unable to pay may have their fees waived. Petitioners must also file several schedules, including ones listing assets and liabilities, income and outgoing expenses, executory contracts and leases and a statement of financial affairs.
The debtor will need to provide the trustee with his or her most recent tax return. Within 21 to 40 days after filing, the trustee will hold a creditors' meeting, which the debtor will be required to attend. At the meeting, creditors may object to the bankruptcy and question the debtor under oath. If the bankruptcy is approved, the trustee will liquidate the available assets. Prior to the discharge, the debtor will be required to take a second credit-counseling course. Before the petition is even filed, the debtor should have taken a pre-filing course as well. At the close of the bankruptcy estate, the remaining debts will be discharged.
Chapter 7 bankruptcy is an option for people who want to eliminate debt and have a fresh financial start. People with questions about bankruptcy may wish to consult with a bankruptcy attorney about their options.
Source: United States court, "Liquidation Under the Bankruptcy Code", November 24, 2014