Bankruptcy is a court-supervised legal process that helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect financially troubled businesses.
In Texas, bankruptcy is governed by both federal law and state-specific statutes. The U.S. Bankruptcy Code provides the framework for bankruptcy proceedings and is applicable in all states, including Texas. Individuals and businesses in Texas can file for bankruptcy under several chapters of the Bankruptcy Code, the most common being Chapter 7 (liquidation) and Chapter 13 (reorganization for individuals) or Chapter 11 (reorganization for businesses). Texas law complements federal law by determining property exemptions that debtors can claim. These exemptions allow debtors to keep certain assets out of the bankruptcy estate, such as a portion of the equity in their home (homestead exemption), personal property, and retirement accounts, among others. Texas has generous exemption laws compared to many other states, which can provide additional protection for a debtor's assets during bankruptcy. It's important for individuals and businesses considering bankruptcy to consult with an attorney to understand how these laws apply to their specific situation and to navigate the complex bankruptcy process.
