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Texas personal bankruptcy filers should not ignore new rules


There are many people in Tyler, Texas and other parts of the country, who are still feeling the aftereffects of the economic downturn that strained the finances of corporations and individuals all over the world. And although various reports suggest that the troublesome financial situation is drawing to its close, many people in Texas still file for Chapter 7 bankruptcy or Chapter 13 bankruptcy protection every month.

Anyone who is contemplating a bankruptcy filing should remember some of the new rules that were implemented when the bankruptcy laws in the United States were changed in 2005. Many Texans know that filing for Chapter 7 bankruptcy relieves the debtor of all debt and, until 2005, way too many people were filing for personal bankruptcy protection under Chapter 7 even when they had the means to repay their debts.

Since the changes in the law were implemented, a trustee will now consider all income that an individual has as well as all financial obligations and then calculate how much disposable income an individual has. If the amount is $100 or less, the bankruptcy court allows the individual to file for personal bankruptcy under Chapter 7. However, if the amount is in excess of $166.66, the debtor must file for bankruptcy under Chapter 13. In case an individual's income falls between these figures, the court decides the chapter under which the individual can file for bankruptcy at its discretion.

Another important aspect that the new laws have addressed is the valuation of assets. Earlier, assets were often sold at extremely low prices to cover debts during a Chapter 7 or Chapter 13 bankruptcy filing. As a result, many creditors had to write-off large sums of money. However, since the implementation of the new laws, the values of all assets are based on the costs that someone would incur replacing that asset. This increase has therefore led to only limited assets being sold while generating money from the sale.

Source: The Paramus Post, "Two Very Important Changes To Bankruptcy Law Everyone Should Understand," Angela Sanders, March 21, 2014

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