Filing for Chapter 7 bankruptcy is not a decision people make lightly. It is often the last resort when debts have become unmanageable and no other realistic options remain. In Texas, the rules for qualifying are clear, but they can also be confusing if you are not familiar with the legal process. The good news is that understanding these requirements will help you know if Chapter 7 is a path you can take and whether it will truly provide the relief you need.
Understanding the Basics of Chapter 7 Bankruptcy
Chapter 7 bankruptcy is often called liquidation bankruptcy. It is designed to wipe out most unsecured debts such as credit cards, medical bills, and personal loans. In exchange, you may need to surrender certain non-exempt property, which a bankruptcy trustee then sells to repay your creditors. In Texas, many people are pleasantly surprised to learn that state exemption laws allow them to keep most or even all of their property, including their home, personal belongings, and retirement accounts.
The entire process usually takes only a few months from the time you file to the time your debts are officially discharged. Once that discharge happens, creditors cannot continue collection efforts against you for those discharged debts.
The Means Test and Why It Matters
The first big hurdle in determining whether you qualify for Chapter 7 in Texas is the means test, which is essentially a financial test that compares your household income to the median income for a household of your size in Texas. If your income is below the state median, you automatically pass and can move forward with a Chapter 7 filing.
If your income is above the median, you still might qualify, but you will have to complete the second part of the means test, which involves calculating your disposable income after deducting allowed living expenses, taxes, and other necessary costs. If your disposable income is low enough, you can still pass and qualify for Chapter 7.
Texas Median Income Levels for the Means Test
The income thresholds for the means test change regularly, so it is important to check the most current figures before assuming you qualify. As of recent updates, the median income for a single filer in Texas is significantly lower than for a family of four, and larger households have higher thresholds, which is why accurately counting the members of your household and your total income is critical when starting this process.
What Counts as Income for the Means Test
When calculating your income for the means test, the law looks at all money earned in the six months before filing, which includes wages, self-employment income, business income, rental income, bonuses, and even some benefits such as unemployment compensation. Social Security benefits are generally excluded, which can be helpful for retirees or people on disability.
It is important to be thorough and honest when listing your income because the bankruptcy trustee will review your financial records. Omitting income or misrepresenting your earnings can result in your case being dismissed or, in more serious situations, potential fraud allegations.
Other Eligibility Requirements in Texas
Even if you pass the means test, there are other requirements you must meet before you can file Chapter 7. First, you must not have had a previous Chapter 7 discharge within the last eight years. If you filed for Chapter 13, you must wait six years unless you paid a certain percentage of your debts through that case.
You also must complete an approved credit counseling course within 180 days before filing. This course is designed to ensure you have explored alternatives to bankruptcy and understand the process you are entering. It can usually be completed online in just a couple of hours.
Debts That Chapter 7 Will Not Eliminate
Even if you qualify for Chapter 7, it is important to understand that not all debts can be wiped out. Certain obligations, such as child support, alimony, most student loans, and recent tax debts, will survive bankruptcy. If the majority of your debt falls into these categories, Chapter 7 might not provide the relief you need.
However, if your debts are mostly unsecured and dischargeable, Chapter 7 can give you a fresh start by clearing those balances completely.
The Role of a Bankruptcy Attorney
While you can file for Chapter 7 on your own, most people benefit from having an experienced Texas bankruptcy attorney guide them through the process. A lawyer can help determine if you truly qualify, ensure that all paperwork is accurate, and represent you in meetings with the bankruptcy trustee. They can also help you maximize your exemptions so that you keep as much of your property as possible.
Because the means test and eligibility rules can be complex, professional guidance can be the difference between a smooth case and one that is delayed or dismissed.
Seek Legal Guidance
Knowing whether you qualify for Chapter 7 bankruptcy in Texas requires more than just glancing at your income. The means test, residency rules, and other eligibility factors all play a role in determining if this type of bankruptcy is available to you.
By taking the time to understand the process and seeking the right guidance, you can make an informed decision about whether Chapter 7 is the best step toward regaining control of your financial future. Call 844-417-6343 today to schedule a consultation with Kisch Consumer Law, PLLC about your plan.
