Smith County Bankruptcy Blog

After a debtor files for bankruptcy in Texas, creditors' attempts to collect will be automatically halted under a stay. One reason why many people seek the protection of Chapter 7 bankruptcy is because it's becoming difficult or impossible to deal with creditor demands, which include lawsuits and threatened actions, repossessions or even constant collection calls. Under the automatic stay, creditors that want to proceed with an action like a lawsuit, auto repossession or lease termination need to first address the situation with the bankruptcy court. Those that do not may face significant penalties.

However, the issue of whether creditors need to actively stop existing actions that have already taken place is one that has not been fully resolved. Different bankruptcy courts have addressed the issue in different ways, and the Supreme Court is expected to decide on the issue in the coming term in order to resolve the uncertainty. In one case, a bankruptcy court penalized a creditor for failing to stop a wage garnishment action for a person in bankruptcy. The creditor was the debtor's former lawyer who had represented her in a divorce. He obtained a judgment against her for unpaid legal bills and filed for wage garnishment.

Texas consumers who feel overwhelmed by debt may want to file for Chapter 7 bankruptcy. The first step for determining qualification is the means test, which uses the median income for the state. Most of the time, making less than this amount means the person can file.

However, there are other conditions that must be met. The person must not have had a Chapter 7 bankruptcy discharged in the past eight years or a Chapter 13 discharged in the past six. The person must also not have had a Chapter 7 filing dismissed because of fraud, misuse of the system, requesting a dismissal because of a creditor's request to lift the automatic stay or violating a court order. A Chapter 7 consumer bankruptcy petition can be filed by an individual, a couple, a sole proprietor or someone with a business partner if the person is personally liable for the business debts in question. However, a different type of Chapter 7 must be pursued for a corporation, partnership or LLC.

According to Bernie Sanders, roughly 500,000 people have gone bankrupt because of medical debt. This figure is based on a study conducted in 2019 that analyzed 910 bankruptcy cases between 2013 and 2016. It revealed that 65.5% of those bankruptcies were caused by medical debts. However, researchers are unsure as to whether the debt itself is to blame for Texas residents and others filing for bankruptcy. Instead, it may be the lost income after experiencing an injury that leads to financial distress.

Another 2019 study found that over 137 million Americans had experienced a financial hardship because of medical debt. While medical debts may be difficult to deal with, there are ways to potentially avoid going bankrupt. For example, individuals are encouraged to build an emergency fund to help pay for unexpected medical and other expenses. This fund should be able to cover a person's living expenses for up to six months.

One of the most common misconceptions about bankruptcy is that you can never recover. Yes, it gets rid of your debt, but then you have that bankruptcy on your record. You can never shake it, you can never really get a fresh start. It feels like giving up on your financial future.

This outlook may be common, but it is very misguided. The truth is that bankruptcy is a fresh start. It can be a positive for your financial future. You can not only recover from it, but you can thrive after bankruptcy. It's time to put this myth to rest.