What Type of Debt Doesn't Go Away With Bankruptcies in Texas?

While declaring bankruptcy may help lift some of the heavy burden of debt off your shoulders, not all debt will be discharged. Which bankruptcy chapter you choose or are qualified for, along with the types of debts you have, will impact the debt that cannot be removed. To better understand what type of debt doesn’t go away with bankruptcies in Texas, speak with an experienced bankruptcy attorney.

Understanding Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 and Chapter 13 bankruptcy are the two most commonly filed by individuals. Chapter 7 is a liquidation bankruptcy, which includes discharging certain unsecured debts and liquating assets for creditor repayment. With Chapter 13, the debtor, or the person who is declaring bankruptcy, will establish a repayment plan over the course of 3-5 years. Any debts left after the repayment period is over are typically discharged.

An important difference between Chapter 7 and Chapter 13 is how they treat secured debts, like car loans and mortgages. Within Chapter 7, the debtor may have to sell their home or car to pay off debts, whereas Chapter 13 will help you maintain your property and catch up on payments. A North Richland Hills bankruptcy attorney can help you further explore the differences between these types of bankruptcy.

Non-Dischargeable Debts in Texas

Bankruptcy will provide you with relief from many types of debt, but not all of them. Debts that are non-dischargeable are:

• Student LoansThe only way that student loans could be dischargeable is if the debtor can prove an undue hardship on themselves and any dependents by showing proof of a disability or that they have made every effort to pay back the loans but cannot do so.
• Child Support and Spousal SupportChild support and spousal support, often called alimony, are not dischargeable. These debts are considered essential for the well-being of children and ex-spouses. If the debtor is unable to pay these obligations, they may face wage garnishment, seizure of their property, and incarceration.
• Certain TaxesSome taxes are non-dischargeable, but some can be eliminated if the debtor meets specific qualifications. Recent federal, state, and local taxes are typically non-dischargeable, but some older debts may be.
• Fraudulent DebtsAny debts that are from fraudulent actions, such as credit card fraud or previous bankruptcy fraud, are non-dischargeable.
• Fines and PenaltiesFines and penalties, including those owed to government agencies like criminal fines, are typically non-dischargeable.
• Personal Injury DebtsIf the debtor has personal injury debts, such as those incurred from drunk driving or intentional harm to another person, they are non-dischargeable due to them being from malicious acts of the debtor’s own choice.
• Secured DebtsSecured debts are those that are tied to collateral, such as real estate or vehicles. While these debts cannot be entirely written off through bankruptcy, it can provide some relief by restructuring your payments or stopping the foreclosure process so the debtor can catch up on payments.

Additionally, any debts you do not include in your bankruptcy petition will most likely not be discharged. Therefore, it is crucial to be transparent during your disclosure period.

Texas Bankruptcy Exemptions

Texas law has generous exemptions for those filing bankruptcy to protect their home and car equity, as well as some personal property, through the following exemptions:

• Texas Homestead ExemptionAs one of the most generous in the United States, the Texas Homestead Exemption allows homeowners to protect an unlimited amount of equity in their primary residence, with some size limits. If the property is within a city, town, or village, it will apply to properties up to 10 acres, and if the property is in a rural area, it will apply to properties up to 100 acres for a single adult or up to 200 acres for a family.
• Texas Motor Vehicle ExemptionThe Texas Motor Vehicle Exemption allows debtors to protect one vehicle from creditors per licensed driver in the household. This means that if there are multiple licensed drivers in a household, each one can protect a vehicle. The vehicles must be used for personal, family, or household purposes, as vehicles primarily used for business do not qualify.
• Texas Personal Property ExemptionsThis exemption allows debtors to protect up to $100,000 worth of personal property as a family or up to $50,000 worth of personal property as a single adult. The types of property that are covered are home furnishings, farming or ranching equipment, tools, clothing, two firearms, and more. This exemption also protects most retirement accounts, college savings plans, and health savings accounts (HSAs).

Texas exemptions are not automatic; you must specifically ask for them. To better understand your own unique case, especially if you have non-dischargeable debts or assets you wish to protect, it is recommended that you contact a bankruptcy attorney.

FAQs

Q: How Long Does the Bankruptcy Process Take?

A: The length of the bankruptcy process will depend on which chapter you file. If you file Chapter 7, it will typically take a few months from the filing date to the discharge of debts. If you file Chapter 13, the repayment plan lasts 3-5 years, after which any remaining dischargeable debts are then forgiven.

Q: Can Medical Debt Be Discharged in Bankruptcy?

A: Yes, medical debt can be discharged if you file Chapter 7 bankruptcy, as medical debt falls in the category of nonpriority unsecured debts. Additionally, there is no cap on how much medical debt can be forgiven when you file for Chapter 7.

If you file for Chapter 13, the medical debt is part of your repayment plan, so you will be required to pay a percentage of it before it can be discharged.

Q: What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy in Terms of Debt Discharge?

A: Chapter 7 discharges most unsecured debts quickly by liquidating non-exempt assets. Chapter 13 involves a 3–5-year repayment plan, allowing individuals to keep assets and discharge remaining debts after the plan is complete. If the debtor has secured debt, Chapter 7 requires collateral to be sold to pay off the debt, and Chapter 13 includes that debt in the repayment plan.

Q: How Can I Determine Which of My Debts Are Dischargeable?

A: To begin determining which debts are dischargeable, you should make a list of all debts you have. In general, dischargeable debts are unsecured debts like credit card debt and personal loans, and non-dischargeable debts generally include student loans, alimony, and child support. A bankruptcy attorney will be able to provide personalized guidance and advice to help you understand which of your debts can be discharged.

Meet With a Texas Bankruptcy Attorney

At Steele Law Firm, PLLC, we understand you may have many questions and concerns about bankruptcy. If you are worried that much of your debt is non-dischargeable, contact us today so we can discuss your options and get you started on a path to financial freedom.