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Houston Bankruptcy Blog

Three reasons why bankruptcy may be a good option

Texas residents who are considering bankruptcy do not take their decision lightly. They usually go back and forth determining if it is right for them. Here are some tips to help individuals determine if this is a good step to take for their circumstances.

When a person has used up all of the money in their checking and savings account and they have to use their credit card to cover essential expenses, their options include increasing their income, cutting their expenses or filing for bankruptcy. If it is impossible for them to do the first two things, bankruptcy may be the only way for a person to stop digging themselves into a hole that keeps getting deeper and deeper.

4 illegal types of debt collector harassment

Few things in life have the potential to be more stressful than having insufficient resources to pay your debts. After all, if you cannot pay your monthly bills, you may worry about meeting your basic needs as well as your family's needs. Even worse, your credit score may plummet, making your financial future uncertain. 

While you likely have some options for addressing your debt, such as filing for bankruptcy protection, you should not have to put up with improper debt collection practices. Fortunately, the law is on your side. The 1977 Debt Collections Practices Act outlaws harassment. Still, debt collectors regularly ignore legal restrictions. Here are four illegal ways a debt collector may attempt to harass you: 

Debt collector harassment is prohibited by law

Bill collectors in Texas and around the country must abide by the provisions of the Fair Debt Collection Practices Act, but many of them do not. The 1977 law strictly prohibits harassment, but individuals struggling with overwhelming debts often receive calls from collection agencies on a daily basis and at inconvenient hours. Bill collectors are not permitted to publicize debts and must cease calling workplaces when asked to do so, but these rules are also widely flouted.

The FDCPA provides consumers who wish to put an end to harassment from debt collectors with a number of remedies. Collection agencies are required to cease communications after receiving a written request, but they may still pursue unpaid debts through litigation. Consumers can also report violations of the FDCPA to the Federal Trade Commission and file lawsuits against abusive collection agencies. The FDCPA is what is known as a strict liability law. This means that consumers must only prove that the provisions of law were violated in order to receive damages.

The Texas homestead exemption in bankuptcy cases

People who are struggling with unmanageable financial situations are sometimes reluctant to pursue debt relief because they are worried about losing their homes. While this may be a real concern for people living in some parts of the country, it is something that Texas residents rarely have to worry about. This is because the Lone Star State has some of the nation's most generous bankruptcy exemptions.

Federal and state exemptions allow individuals who file Chapter 7 and Chapter 13 bankruptcies to protect certain assets such as their automobiles and tools they use for work. Individuals seeking debt relief may choose between state and federal exemptions, but this is not a difficult decision for those living in Texas. Most states place a dollar limit on the value of a home or the amount of home equity that can be protected in a bankruptcy, but the homestead exemption in Texas is unlimited as long as the size of a the property does not exceed 100 acres in rural areas or 10 acres in a city, village or town.

Bankruptcy court rejects medical marijuana expenses

People who use medical marijuana in Texas may run into problems in bankruptcy court when it comes time to set up a court-ordered repayment plan. Businesses in the marijuana industry have had trouble seeking bankruptcy protection, even in fully legal states, due to the continuing federal criminalization of cannabis under the Controlled Substances Act. Bankruptcy courts have ruled that they cannot provide relief from debts to companies whose businesses violate federal law despite state legality. While these cases dealt with companies directly involved in the cannabis business, medical marijuana has arisen as an issue in some personal bankruptcy cases.

When filing for Chapter 13 bankruptcy, individuals can retain many of their assets without liquidating them. However, they must make a plan to pay off their debts over the years to come. Many individuals who earn too much to file for Chapter 7 bankruptcy but still face unrepayable debts opt for Chapter 13 bankruptcy. The repayment plan takes into account monthly expenses that are deducted from the debtor's disposable income. One bankruptcy court has rejected an attempt to deduct expenses for prescribed medical marijuana. The people filing for bankruptcy said that they spent $900 each month on prescribed cannabis.

Economic forces behind current decline in bankruptcy filings

The latest report about bankruptcy filings produced by Supreme Court Chief Justice John Roberts indicated that filings have reached their lowest number since 2010. Prior to 2010, consumers had sought bankruptcy protection in increasing numbers due to the financial collapse of 2007 and 2008. Although debts remain a concern for many people in Texas, multiple economic forces appear to be reducing the caseloads at bankruptcy courts.

One attorney speculated that the passage of the Affordable Care Act spared some people the burden of medical bills that they could not pay because they gained access to medical coverage. The foreclosure crisis that accompanied the Great Recession also led to government programs that aided distressed homeowners. These federal programs encouraged lenders to work out new payment plans with borrowers. As a result, fewer people needed to file for bankruptcy due to their inability to make house payments.

New law increases bankruptcy protections for veterans

Military veterans make up about 10% of the population in Texas and around the country, and about 1 in 4 receive disability benefits from the Veterans Benefits Administration. Disability benefits paid by the Social Security Administration are protected from creditors during a personal bankruptcy, but bankruptcy judges ruled in five recent cases that Veterans Affairs benefits were not, meaning that disabled veterans were required to include their VA benefits in their disposable income disclosure paperwork.

Groups such as Veterans of Foreign Wars and the American Legion were angered by this requirement and prompted Congress to set aside party differences and take action. The result of this bipartisan effort was the Honoring American Veterans in Extreme Need Act, which President Donald Trump signed into law Aug. 23. The HAVEN Act provides VA benefits, including combat-related compensation and survivor indemnity allowances, the same protection in a Chapter 7 or Chapter 13 bankruptcy case as SSA disability benefits.

Medical bills, the wolf at the door and bankruptcy help

It is no secret that medical costs across the U.S. have skyrocketed or that it affects people of all ages.

Even those who have health care insurance struggle. Sometimes, it comes down to a choice between paying medical bills and buying groceries. This is when many people opt for bankruptcy protection.

Bankruptcies remain on a credit report for years

Those who file for bankruptcy in Texas will likely notice that the filing is listed on their credit reports. How long it stays on a credit report depends on what type of protection an individual sought. If a person filed for Chapter 7 bankruptcy, it will stay on that individual's credit report for up to a decade. A Chapter 13 bankruptcy only stays on a credit report for seven years.

It is important to note that the impact of a bankruptcy is stronger soon after filing and becomes less significant as time passes. It is also possible to get a bankruptcy off of a credit report in less than 7 or 10 years. This may occur if information related to the proceeding is not properly listed on the report. In the event that a bankruptcy doesn't go away after 7 or 10 years, people should be sure to let the credit bureaus know to remove it.

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.