Starks & Gonzales P.C.


Houston Bankruptcy Lawyer
Attorney & Counsel
Personal Bankruptcy Chapter 7 and Chapter 13 Relief

713-961-3555

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bankruptcy basics

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Avoiding Bankruptcy Mistakes


Bankruptcy is not a pleasant option for anyone, and the negative impact of a bankruptcy can scare many into making mistakes that end up costing more over time. With a little preparation, however, you can ensure that your bankruptcy process goes as smoothly as possible.

A very common pitfall that many either commit or at least consider, is liquidating retirement assets. While cashing in an IRA, 401K or other types of retirement seems like an easy fix for a current economic problem, it is a big mistake. This only serves to take away the debtor’s hard earned security for tomorrow.

Your Retirement Funds Can Be Protected in Bankruptcy.
Working with bankruptcy attorneys, you will understand how it is possible to get out from under the heavy pressure of debt without risking your financial future. Often, clients do not even realize that this is a possibility. Secure swift relief from debt and creditors. Protect the future that you have built for yourself and your family by working with a bankruptcy attorney in Houston.

Stay Away From Debt Management (Without an Attorney’s Help).
It is a common mistake to turn to debt management companies for relief. Consumer debt can be hard to manage, and debt management companies may seem like an easy way out. Unfortunately, many of these companies are just in it for a quick dollar, and not your best interests. Many of these companies present you with a debt structure, collect your money and never follow through with paying your creditors. You end off worse than you started.

A Fraudulent Transfer of Assets Is Asking for Trouble.
While transferring your assets to another individual may seem like a great way to “hide” your property from a bankruptcy trustee, this is a mistake. Laws have been established to curb this practice by making certain transfers illegal. Fraudulent asset transfer occurs when a debtor does so to defraud his or her creditor. Selling your asset for less than it is worth to a friend is also fraud. An experienced attorney will let you know what constitutes fraud and keep you on the right side of the law.

If a transfer is called into question, a qualified attorney will help you with your defense against the accusation. There are times when transfers are legitimate and a good lawyer will properly defend your right to do so. Applicable defenses include those transfers made in good faith or those made during the course of normal business procedures.

Credit Repair Scams Are Rampant.
Many legal counselors and attorneys will protect consumers against credit repair scams. We are constantly on the watch for predatory or deceptive practices made by credit card companies, credit repair businesses, banks and mortgages.
What Is Discharge Under Chapter 7?


In bankruptcy cases, the term “discharge” is frequently used. In the most straightforward sense, to have one’s debts discharged means that those debts are wiped out and their slate is cleared; the debtor’s liability for the discharged debt is essentially erased. However, the reality is more complicated. Often, it is only certain types of debts that are discharged, and which are forgiven is usually determined by what type of bankruptcy proceedings are occurring, which types of debts are involved, and the identity and past actions of the debtor. In short, often some or many debts will linger, even after Chapter 7.

Qualifying for a Discharge
Before debts will qualify for a discharge under Chapter 7, several criteria must be met:

Debt discharges can only occur once during each nine-year period.
According to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, individual debtors seeking discharge must enroll in and complete a personal financial management class.
The debtor must have history of cooperation and honesty. If there were incidents such as poor record keeping before filing, fraudulent transfers, or ignoring orders made by the court after filing, the court is much more likely to deny the discharge.
When Your Discharge is Granted
Once a discharge is granted, the debtor is afforded some protections:

Legal action cannot be taken for collection of discharged debts.
Accordingly, any letters, phone calls or other communications related to the discharged debt must stop.
What A Discharge Does Not Do
Unfortunately, a debt still exists after it’s been discharged; the debt is not completely cancelled. Attempts to collect on the debt from the debtor who had it discharged must cease, as the debtor is no longer personally liable, but the discharge does not automatically protect any guarantor or co-debtor from continued or further liability.

A debtor filing for Chapter 7 relief must also consider any outstanding liens. Liens are not affected by bankruptcy discharge. Here’s an illustrating example: a debtor had previously secured a $6000 loan with a vehicle that was worth $2000, and the $6000 was left unpaid. The debtor files for Chapter 7 bankruptcy and is granted a discharge on the debt. In this situation, the creditor’s security interest is not eliminated with the rest of the debt; the car can still very well be repossessed. The protection provided to the debtor under the bankruptcy discharge only applies to the leftover debt that remains between the value of the car and the amount of the original loan, or $4000.

Discharges Can Be Revoked
Under certain circumstances, usually involving dishonest behavior on behalf of the debtor, discharges are revoked. A Chapter 7 discharge can be reversed by the court in these scenarios:

A revocation is requested by a creditor or the trustee.
The debtor misstated or omitted crucial information in connection to the audit of their case.
The debtor acquired property and purposefully did not report that property or give it to the trustee.
The debtor used fraudulent means to obtain the discharge.
Will I Lose My Property in a Chapter 7 Bankruptcy?


If you are considering a chapter 7 bankruptcy, then you will need a qualified bankruptcy lawyer who will be able to examine your case, and help you determine what kind of bankruptcy is appropriate for your situation. There are two main types of bankruptcy – Chapter 7 and Chapter 13.

Debt is handled different in each type of Bankruptcy, so if maintaining your assets is your largest priority, then a chapter 7 may not be the best option for you. In a chapter seven bankruptcy, debtor assets are sold, or claimed by creditors in the forms of liens or mortgages to pay off debt. A Chapter 13 bankruptcy differs in the fact that you may maintain all your assets, but must create a payment schedule to repay debts in full.

If you are underwater on a mortgage, or own assets that act as a drain on your gross wealth, a chapter 7 may be a good option for you. Debt from boats, cars, or other large purchases can be forgiven in a chapter 7.

There is a cost associated with filing a bankruptcy. This is not relegated to the costs of the process. You will also be legally required to inform potential employers or debtors about this, if asked. The bankruptcy will remain on your credit report for seven years in some cases, and may affect your chances of getting a home, buying a new car, or even landing a job. Consider this carefully before you plan to file bankruptcy, and ensure that you can handle this high price.

In a chapter seven bankruptcy, you must also be prepared to relinquish some of your property in return for being clear of debt. There is a list of items on the federal and state level that you will be allowed to keep. It’s important that you discuss your possessions with a qualified bankruptcy attorney, so that you can get a clear understanding of what items you will be able to keep, and which will be taken. You will also need help deciding whether the federal or state laws are the best for your situation.

If you file a chapter 7, here are some items that you will not be able to keep

Collectibles, or large collections
Cars, above one vehicle for personal transport
Monetary assets, like CD’s or investments
Family items with intrinsic worth
You may be able to keep the following, depending upon your profession and personal situation:

Professional tools required by your job
Everyday living items, such as clothing, basic furniture, or housewares
Benefits supplied by the government, such as social security, Medicaid, or Medicare
IRA’s, 401(k)’s or pensions
It’s advised that you work with a bankruptcy attorney to make the difficult decisions you are going to be facing, such as whether or not to file, which guidelines to use, and how to fill out the paperwork.
How Bankruptcy Affects Your Spouse

If you’re considering bankruptcy, you may be wondering how bankruptcy will affect your spouse. Depending on the circumstances involved, bankruptcy can affect your spouse financially. In most cases, however, your debts are yours alone, unless your spouse has co-signed or guaranteed your debt. For example, if you are both joint-debtors on an account (i.e. your mortgage), then bankruptcy will affect both of you jointly.

Certain collection agencies may threaten that they will go after your spouse for payment on a debt. This is a commonly used scare tactic. In most cases, collection agencies can only pursue payment from the person who holds the debt. Your spouse cannot be held liable for a debt unless it is a joint-debt, or your spouse was a co-signor for the debt.

If you have no joint debts, then one spouse’s bankruptcy will have no effect on the other spouse’s credit score. However, due to the bankruptcy, the spouse who filed for bankruptcy may not qualify as a co-signor in the future. This means that bankruptcy can have indirect effects on your spouse in the future. If your spouse has a supplemental credit card (an additional credit card on your account), this is another situation where your spouse can be affected by your bankruptcy. If your spouse has a credit card with their name on it, and if they have used the card, then they are responsible for the entire credit card debt.

Bankruptcy can also affect your spouse in non-financial ways. The emotional and mental distress of bankruptcy can be significant. Watching a spouse lose most of their assets and go through bankruptcy can be a very emotionally draining experience. When you file a bankruptcy petition, your spouse may begin to worry about what other people will think of them. Loss of reputation and concern over social status is something that certain spouses may experience.
Bankruptcy and Child Support

If you’re going through bankruptcy, you may be wondering about child support. Will child support debt be discharged in bankruptcy? The answer is no. Child support is not discharged in bankruptcy. This is considered a social & political obligation. Social and  political obligations (such as alimony, child support, taxes, and student loans) are very unlikely to be discharged in a bankruptcy. If you owe child support, you cannot escape your responsibility by filing for bankruptcy. Bankruptcy does not place a stay (hold) on child support payments, past-due child support payments (payments in arrears), or paternity tests.

If you file for Chapter 13 bankruptcy, your financial life during the reorganization process can get complicated. However, child support payments are considered priority debt – meaning that they must be paid before other obligations such as credit cards, medical bills, and other unsecured debt. If you are owed child support payments by someone who is filing for bankruptcy, understand that the payment may be delayed during the Chapter 13 reorganization process; however, it will not be discharged.

In bankruptcy, you are required to file a schedule of assets, liabilities, exemptions, and statement of financial affairs. This can be very valuable information for a parent who is owed child support by the person filing for bankruptcy. If you are owed past-due child support by someone filing for bankruptcy, you can intervene in the bankruptcy proceedings without charge and contest the amount that is owed to you (the debt in arrears).

If you pay child support, there is a good chance that child support payments will be a crucial component to meeting the Chapter 13 bankruptcy repayment plan. In other words, if a bankruptcy filer fails to meet his child support obligations (both current and past due) according to the plan, the bankruptcy can be nullified.
© 2011 Starks & Gonzales, P.C. is a debt relief agency that helps people file for bankruptcy pursuant to 11 U.S.C. sec. 528 under the Bankruptcy Code.  Unless otherwise indicated, attorneys listed in this web site are not certified by the Texas Board of Legal Specialization.