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Houston Bankruptcy Blog

More elderly people file for bankruptcy

An increasing number of older people in Texas and across the country are filing for bankruptcy. There are a number of factors contributing to the problem of people facing severe economic crisis after they reach retirement age. While in 1991, only 2% of all bankruptcy claims were made by elders, that figure has now reached 12%. Personal bankruptcy can provide relief from most types of debt, but it does exclude some major obligations, including student loans and certain taxes. In many cases, elders may accumulate student loan debt as co-signers for younger relatives.

Most older people who seek debt relief through personal bankruptcy have lower incomes. Many point to social changes as major factors in the rise in elder bankruptcies. For example, wages have stagnated, pension plans have been eroded and trade unions have been weakened. Many companies have ended their pension plans or switched to 401(k) plans that rely mainly on employee savings. This is particularly challenging for people with low incomes.

The process to obtain new debt during a repayment period

In a Chapter 13 bankruptcy case, a Texas debtor can ask to accrue new debt during the repayment period. However, a trustee must review the request, approve it and send a motion to incur new debt to the judge. A copy of the motion will also be sent to creditors. If all parties agree to the request, an order to incur debt will be created. The debtor will then be able to complete the process of applying for a loan.

If an individual is seeking a car loan, they will first find a vehicle and negotiate the terms of the deal. The loan term, the interest rate and the monthly payment will be included on a buyer's order sheet. This sheet is what the trustee will look at when determining if the loan is reasonable. There is a chance that the vehicle could be sold before the order to incur debt is handed down.

Why millennials declare bankruptcy

Finding and maintaining financial security as a millennial can be difficult. According to a recent study, people between 25 and 34 years old have $42,000 in debt on average. If you are a millennial dealing with debt, you may start to consider filing bankruptcy. 

If that is the case, you are not alone. In fact, millennials are declaring bankruptcy at a faster rate than other age groups. Here are some common reasons why more and more millennials are looking to bankruptcy to resolve their debts.

The difference between Chapter 7 and 13 bankruptcy

Those who need help getting their finances in order could do so by filing for bankruptcy. In most cases, a debtor in Texas or any other state will file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is for those who have unsecured debts and make less than the median income in their state. It generally takes about three to six months to have debts discharged.

Equity in a home or car may be exempt from being used to pay off creditors. If a person makes more than the median income level, he or she may have no choice but to file for Chapter 13 bankruptcy. A Chapter 13 bankruptcy case could take several years to resolve, but it may be possible to retain property in such a proceeding. In fact, it may be possible to buy a car or add other debts while the case is still ongoing. However, this assumes that a lender is willing to make a loan while the case is still pending.

Study finds many millennials have credit card debt

While some Texas millennials might be burdened by student loans, far more are likely to carry credit card debt. According to a report from, only 37% of millennials around the country said they had student loan debt compared to 67% who had credit card debt.

The majority of people were not debt-free in any generation although baby boomers had the highest rate of being debt-free at 29%. Only 11% of Gen Xers and 13% of millennials said they were debt-free. Furthermore, around one-quarter of all credit card holders said they expected to die owing money. This was true of more women than men, 25% compared to 19%. Of those who did anticipate getting out of debt at some point, millennials thought it would happen by the time they were 49. Gen Xers expected that they would be debt-free by the age of 67, and baby boomers expected to be debt-free by the age of 81.

Bankruptcy could improve an applicant's financial future

Personal beliefs often motivate people in Texas to avoid bankruptcy even if the struggle to pay debts becomes overwhelming. However, bankruptcy can be a positive decision that gives applicants a second chance. The process could include financial counseling that helps people eliminate bad money habits and avoid debt in the future.

One woman who shared her bankruptcy experience said that she no longer loses sleep over her debts. Although she does not have much money at present, she appreciates that chance to live life free of debt. She said that the personal finance courses that she attended as part of the bankruptcy process gave her the skills to budget and stop turning to credit cards.

What to expect in a Chapter 13 case

Individuals who are struggling to pay their bills may decide to file for protection from creditors. Those who want to keep their Texas home or other property will want to file for Chapter 13 bankruptcy. In a Chapter 13 case, debtors make payments to creditors over a period of three or five years. Child support, back taxes and alimony payments are considered priority debts, which means that payments are applied toward those balances first.

Secured creditors such as auto or mortgage lenders are the next to be paid. Finally, unsecured creditors such as credit card or personal loan providers are paid if there is any money left over. Student loan debts generally cannot be discharged in a Chapter 13 case, but a debtor may still be required to make payments on those loans during the repayment period.

Ask for proof of debt when a debt collector files a lawsuit

People in Texas may have options for defending themselves when sued by debt collectors. If a debtor takes no action to respond to a lawsuit, a judge will side with the plaintiff, who is the debt collector. The resulting judgment could give the collector the right to garnish the debtor's wages or seize his or her assets. To potentially prevent this default judgment, a debtor could demand that the plaintiff show documentation that proves the right to sue in the first place.

Many creditors sell debts to collection agencies that then sue debtors. These debts might change hands multiple times, which introduces the possibility that a plaintiff might not have the records to back up a debt claim. To challenge a plaintiff, a debtor must first respond to the lawsuit within the deadline, usually three or four weeks from the date of the papers being served. This response takes the form of a formal Answer or legal brief filed with the applicable court. In this document, a debtor should never admit responsibility for a debt. Instead, the Answer should demand proof.

Understanding your debt-to-income ratio

If you are like many of your friends and relatives in the Houston area, you work hard every day to support yourself and your family. Unfortunately, though, with rising housing and other costs, making ends meet can be difficult. If you have a credit card, you may rely on it to help you make up the difference. 

The average Texan has between $7,000 and $8,000 of credit card debt. If you already struggle to pay your monthly bills, paying off such a high amount of debt may seem impossible. Whether you can do so without pursuing bankruptcy protection probably depends on your debt-to-income ratio. 

Pros and cons of having multiple credit cards

Many people in Texas have around three or four credit cards. A study by The Ascent found that, on average, millennials have three credit cards while baby boomers and Gen Xers have four. In all age groups, 1 in 10 people said they had six or more credit cards. There are advantages and disadvantages to having multiple credit cards.

Since payment history is an important factor in credit scores, having many credit cards increases the opportunity to develop a strong history. Having more cards also means that people use less of their available credit, and this also contributes to strong credit scores. More credit cards could mean that more funds are available in case of emergencies. Finally, having more credit cards gives more access to rewards and cardholder benefits.