Cheryl and Andrew Neeli have an 80 acre ranch outside of Dallas, Texas. There they raise their family and alpaca llamas. In addition to their stock of llamas, they have a couple of horses, a few cows, and a chicken coop. Their business of shearing and selling the llama wool has proved to be very profitable, however, Andrew recently occurred some very large medical bills due a complicated knee surgery after a tractor accident. Combining the added bills of running farm, creditor bills, and new medical bills, in a few short months the Neeli’s were underwater and couldn’t afford to even pay their credit card bills.

What are their options? The Neeli’s could continue on, hoping things will get better, and try to fight their way out of debt themselves. Andrew hopes he will be able to help shearing in a couple of months, because they don’t have the income to have another hired hand. As soon as any calamity hits however, such as another injury, repossession on their tractor, or even an overdue mortgage payment, the Neeli’s would be financially crippled.

A Chapter 7 Can Bring Hope

Chapter 7 bankruptcy can turn eliminate the most dire of financial situations. It can stop a foreclosure, lift a garnishment, stop creditor harassment, and more. Also known as a liquidation or straight bankruptcy, Chapter 7 works by evaluating a debtor’s financial situation and discharging nearly all debt.

It takes approximately three to six months to go through the bankruptcy process. You will have to file a petition (a set of financial documents) with the court, and attend a short hearing called a ‘Meeting of Creditors.’ Typically creditors do not come to this hearing; rather there is a representative of all creditors called a Trustee that discusses your case with your attorney and the bankruptcy judge.

You will be able to get rid of a number of secured and unsecured debts. However, there are a number of debts that will not be forgiven. Nondischargeable debts include:

• Alimony or child support payments
• Student loans
• Certain taxes or tax liens
• Debts obtains through fraud, or false representation
• Debts from judgments regarding personal injury or wrongful death

All credit card debts, medical bills, judgments, garnishments, personal loans, mortgages and other secured debt can all be discharged. Once completed, a debtor has a chance to start over with a clean slate.

You Can Keep the Farm (or House)

What about the Neeli’s farm? If they lose it, they will have no way to feed and support their family. According to federal and state law, exemption laws have been put in place to help debtors maintain a lifestyle balance. According to Texas law, those filing for bankruptcy have the additional choice of choosing between state or federal exemption laws. This provides better options when it comes to personal financial situations. Texas exemption laws include:

Home or Farm Exemption – Your home or farm (up to 200 acres for families) is exempt.

• Personal Property – All property listed below valued up to $30,000 is exempt. This is called a group value, and it includes any items from these categories.
• Home furnishings
• Jewelry
• Wearing apparel
• Firearms – Only 2 are exempt
• Animals – This includes all livestock and pets, with a limit of 2 horses, 12 head of cattle, or 60 head of other types of livestock
• Vehicle
• Benefits and Insurance – 100% of the following:
• ERISA benefits
• Public Assistance
• Unemployment compensation
• Worker’s compensation
• College savings plans and tuition
• FEMA benefits
• Federal civil service disability and death benefits
• Pensions – Individuals who have worked for the following categories may qualify for 100% pensions exemption:
• Law enforcement
• Teachers
• Judicial system
• County and district employees
• Firefighters
• State employees
• Medal of Honor employees (includes those who have worked for the Army, Navy, Air Force, or Coast Guard)
• CIA employees
• Wages – All income is exempt

Additional exemptions are available for federal laws. Please note that the amount exempt can change annually. Your Texas bankruptcy attorney will have the most current exemption laws available. These laws will not only help the Neelis protect their farm, but it will also help them to keep other personal property, making life after a Chapter 7 bankruptcy even easier.

You Must Meet the Requirements

While it a Chapter 7 bankruptcy may be the best option for the Neeli family, they are still required to pass the necessary qualifications. In 2005 a Bankruptcy Reform Act was passed by Congress making it more difficult to qualify for a bankruptcy Chapter 7 or any other category.

In Texas, residents must fall at or below the median income level for their respective family size. If a debtor exceeds the average income level, he may have to pass a means test. The current average income level is as follows: (Please note that these numbers are subject to change.)

• Single Individual — $38,294
• 2 Individuals — $55,178
• 3 Individuals — $56,445
• 4 Individuals — $65,477

For families over four members, debtors must add $7,500 per person to his/her income base.

Those who exceed the income level will need to provide additional financial information to a bankruptcy attorney. He/She will help you determine if you pass the means test. This test is a series of mathematical calculations using your asset and debt ratio to discover if a Chapter 7 bankruptcy is your best option.

The Neelis were able to get back on their feet in less than a year. Andrew’s knee healed nicely, they kept their farm and their house, but let go of an older vehicle and all of their credit card and medical debt. Don’t wait for your debt to drag you down. Contact a Texas Chapter 7 bankruptcy attorney today.

Texas Bankruptcy Courts

624 South Polk Street, Suite 100
Amarillo, Texas 79101
Phone: (806) 324-2302

Homer Thornberry Judicial Building
903 San Jacinto Boulevard, Room 322
Austin, Texas 78701
Phone: (512) 916-5238

Jack Brooks Federal Building and
United States Courthouse
300 Wilow Street, Suite 100
Beaumont, Texas 77701
Phone: (409) 839-2617

United States Courthouse
1133 North Shoreline Boulevard, Room 208
Corpus Christi, Texas 78401
Phone: (361) 888-3142

Earle Cabell Federal Building and
United States Courthouse
1100 Commerce Street, Room 1254
Dallas, Texas 75242
Phone: (214) 753-2000

Allstate Building
8515 Lockheed Drive
El Paso, Texas 79925
(915) 779-7362

Eldon B. Marion United States Courthouse
501 West Tenth Street, 1st Floor
Fort Worth, Texas 76102
Phone: (817) 333-6000

Bob Casey United States Courthouse
515 Rusk Street, Room 5300
Houston, Texas 77002
Phone: (713) 250-5500

United States Courthouse
1300 Victoria Street, 1st Floor
Laredo, Texas 78040
Phone: (956) 723-3542

George H. Mason Federal Building and
United States Courthouse
1205 Texas Avenue, Room 306
Lubbock, Texas 79401
Phone: (806) 472-5005

Wells Fargo Bank Building
660 NOrth Central Expressway, Suite 300B
Plano, Texas 75074
Phone: (972) 509-1240

Federal Building United States Courthouse
100 East Wall Street, Room P-163
Midland, Texas 79701
Phone: (432) 683-1650

Hipolito F. Garcia Federal Building and
United States Courthouse
615 East Houston Street, Room 597
San Antonio, Texas 78205
Phone: (210) 472-6720

110 North College Avenue, 9th Floor
Tyler, Texas 75702-7226
Phone: (903) 590-3200

United States Courthouse
800 Franklin Avenue, Room 140
Waco, Texas 76701
Phone: (254) 750-1513