New laws are passed regularly, and in many cases, they go into effect on the first day of the following year. However, keeping up with changes to the law can be difficult, especially for members of the general public who are not well-versed in legal issues. It can be important to be aware of these changes, because they can affect people's lives in many ways. One Texas law that took effect on January 1, 2023 may play a role in cases involving bankruptcy or other debt-related issues. This law gives debtors more options for preventing creditors from seizing their assets following a legal judgment.

New Procedures for Claiming Exemptions to the Seizure of Personal Property by Creditors

HB 3774 made a number of changes to the justice system in Texas, but one of the most important changes involved the rules that will be followed when debtors assert exemptions to asset seizure. This may be an issue in cases where creditors pursue lawsuits against debtors in an attempt to recover unpaid debts. After a creditor obtains a judgment against a debtor, they may then take action to seize the debtor's assets, including funds in bank accounts, vehicles, or other personal property. However, certain assets are exempt from seizure under the law, and HB 3774 required the Texas Supreme Court to implement new rules that will allow debtors to claim these exemptions and prevent the loss of their property.

Until November of 2022, student loans were nearly impossible to discharge in bankruptcy. The previous standard to discharge student loans required a total inability to repay student loan debt. In practice, this meant a debtor needed to be unable to ever work or earn a living.

Now, the Department of Justice, in close coordination with the Department of Education, is implementing a new process at the outset of adversary proceedings in which debtors seek to discharge federal student loans in bankruptcy. While the bankruptcy judge makes the final decision on whether to grant a discharge, the Justice Department can play an important role in that decision by supporting discharge in appropriate cases. The new process will help ensure transparent and consistent expectations for the discharge of student loan debt in bankruptcy; reduce the burden on debtors of pursuing such proceedings; and make it easier for Justice Department attorneys to identify cases where discharge is appropriate.

Under the Justice Department’s new process, debtors will complete an attestation form to assist the government in assessing the discharge request. The Justice Department, in consultation with the Department of Education, will review the information provided, apply the factors that courts consider relevant to the undue-hardship inquiry, and determine whether to recommend discharge. Even where the applicable factors may not support a complete discharge, where appropriate, the Justice Department will consider supporting a partial discharge. Justice Department attorneys will assess the undue-hardship factors in the following manner:

Being in debt can be a difficult experience, and debtors may not only face financial difficulties, but they may need to deal with harassment by creditors or concerns about foreclosure, repossession, or legal judgments. Filing for bankruptcy is often the best way to rectify these concerns, and the completion of the bankruptcy process will allow certain debts to be eliminated. However, debtors will need to be aware of the possibility that their bankruptcy case could be dismissed. By understanding why this might happen, debtors can take the proper steps to avoid any issues that could affect their ability to receive relief from their debts.

When Can a Chapter 7 Bankruptcy Be Dismissed?

Chapter 7 involves selling some of the debtor’s assets in order to pay off creditors, and it allows debts to be discharged relatively quickly. A Chapter 7 case can be dismissed if the debtor fails to complete the required credit counseling, does not provide full and accurate financial information, or fails to appear at any court hearings or meetings with creditors. In addition, a case can also be dismissed if the debtor intentionally tries to hide assets or commits any type of fraud during the bankruptcy process. 

When Can a Chapter 13 Bankruptcy Be Dismissed?

Chapter 13 is known as “reorganization bankruptcy” because it allows debtors to keep their property while reorganizing their debts into an affordable payment plan that will last for several years. A petition for this type of bankruptcy must include proof that the debtor has enough disposable income to make payments toward their debts over time. Therefore, if a debtor fails to comply with this requirement or fails to make payments on time under their repayment plan, then their case may be dismissed. In addition, the circumstances described above that may affect a Chapter 7 case may also lead to dismissal in a Chapter 13 filing. 

Divorce can be difficult enough in any situation, but there are some cases where large debts for one or both parties may lead to additional financial problems that will make it harder for a person to provide for themselves after ending their marriage. Fortunately, bankruptcy can provide an option for receiving relief from debts. However, if you are considering filing for bankruptcy during your divorce, there are a few things to keep in mind. 

Debt Division During Divorce 

Debts acquired during a couple's marriage (with some exceptions) will usually be split between the spouses during the process of dividing marital property. Depending on the extent of your debts and the other assets you own, you and your spouse may be able to work out arrangements for how to divide debts fairly. However, it is important to understand that if you have joint debts, such as a shared credit card account, you will both be responsible for repaying what is owed, regardless of the decisions you make during your divorce. If debts are allocated to one spouse, and that person fails to pay what is owed in the future, a creditor may take action to collect the amount owed from the other spouse. Because of this, it is often a good idea to determine your options for filing for bankruptcy while your divorce is still ongoing.

Filing for Bankruptcy Before Your Divorce Is Finalized 

It may be possible for you and your spouse to file for bankruptcy together while you are still married. This is generally an option in Chapter 7 bankruptcy cases, and by including your joint debts in your bankruptcy filing, you can wipe out all of the debt that you owe, ensuring that you and your spouse will both have the necessary financial resources once your divorce has been completed. This can be a good solution for debts such as credit cards and medical bills, and it will prevent the possibility that one spouse may file for bankruptcy in the future, leading creditors to attempt to collect payments from the other party.

While there are a number of reasons why people consider bankruptcy, they usually involve large debts and financial difficulties that affect a person's ability to meet their financial obligations. Unfortunately, the non-payment of debts can lead to additional difficulties, such as a potential repossession of a vehicle if a person is unable to make payments on an auto loan. If you are struggling to make your car payments, you may be wondering if bankruptcy can help you keep your car. Your ability to avoid a repossession or recover a vehicle that has been repossessed will depend on several factors, including the type of bankruptcy you file, the value of your car, and the amount you owe.

Can Bankruptcy Prevent a Repossession?

There are two different types of bankruptcy, and it is important to understand repossessions and vehicle loans will be treated in each of these options. In a Chapter 7 bankruptcy, also known as a liquidation bankruptcy, some of your assets may be sold off to repay your creditors, and your debts may then be discharged. In a Chapter 13 bankruptcy, also known as a reorganization bankruptcy, you create a repayment plan to repay your creditors over time. This repayment plan will last for several years, and once it is completed, the unsecured debts that still remain will be discharged.

If you file for Chapter 7 bankruptcy, the repossession process will be put on hold while your case is pending. Texas law allows one vehicle to be exempt from liquidation during bankruptcy for every member of your family with a driver's license. However, if you still owe money on your auto loan, defaulting on that loan or discharging it during bankruptcy will result in the lender repossessing your car. If you want to keep your car, you will most likely need to reaffirm the debt with the creditor, which means that you agree to continue making payments on the loan. If you do not have the financial resources to make up any missed payments, you may be unable to keep the vehicle.