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Bankruptcy is a federal process that helps individuals and businesses deal with overwhelming debt by restructuring obligations or obtaining a court-ordered discharge. If you live in Katy, Texas, bankruptcy cases are handled in the United States Bankruptcy Court for the Southern District of Texas - Houston Division. Although bankruptcy is governed by federal law, Texas state law plays a key role because Texas has its own system of exemptions that protect certain property from creditors during a bankruptcy case.
Filing for bankruptcy can be straightforward for some people, but there are many situations where having a lawyer can make a major difference in the outcome. Common reasons to seek legal help include:
- You own a home, significant assets, retirement accounts, or a business and need help identifying and preserving exemptions.
- You have complex debts such as significant tax liabilities, business debts, or multiple secured creditors.
- You are above the income thresholds that trigger the means test and need help deciding whether Chapter 7 or Chapter 13 is appropriate.
- You face imminent foreclosure, repossession, wage garnishment, or creditor lawsuits and need immediate protective steps.
- You received bankruptcy-related letters or lawsuits claiming fraud, preference payments, or other actions that may lead to litigation.
- You run a small business and need help with Chapter 11, Chapter 13, or business restructuring options.
- You want to negotiate reaffirmation agreements, resolve creditor objections, or handle trustee claims.
In these situations, an experienced bankruptcy attorney can explain options, prepare and file documents correctly, represent you at hearings and the meeting of creditors, and help you avoid costly mistakes that could jeopardize your discharge or protected property.
Key local and state-specific considerations for people in Katy include:
- Federal bankruptcy framework: Bankruptcy chapters most commonly used by individuals are Chapter 7 for liquidation and Chapter 13 for wage-earner reorganization. Business owners may also use Chapter 11 or Chapter 13 depending on the circumstances. All filings are in federal bankruptcy court - most Katy residents file in the Southern District of Texas, Houston Division.
- Texas exemption system: Texas has opted out of the federal bankruptcy exemptions, so most debtors must use Texas state exemptions. Texas offers strong protections for primary residences - a generous homestead exemption - subject to acreage and timing limits. Texas also protects many retirement accounts, certain types of personal property, and tools of the trade. The exact protection depends on individual facts and timing of property acquisition.
- Means test and eligibility: Eligibility for Chapter 7 is screened by the federal means test, which considers household income and family size. High-income filers often must file Chapter 13 instead.
- Automatic stay: Filing a bankruptcy petition immediately triggers an automatic stay that halts most collection actions, including foreclosures, repossessions, and wage garnishments, until the court or a creditor acts to lift the stay.
- Local court procedures: The Southern District of Texas has local rules and procedures for filing, electronic case management, and creditor meetings. Expect to attend the 341 meeting of creditors, usually held in the Houston Division for Katy filers. There are also local practices regarding fee examinations, chapter-specific plan requirements, and trustee procedures.
- Required counseling and education: Federal law requires debtors to complete a pre-filing credit counseling course and a post-filing debtor education course to receive a discharge. These courses must be completed with approved providers within specified time frames.
For individuals the most common chapters are Chapter 7 and Chapter 13. Chapter 7 can discharge many unsecured debts after non-exempt assets are liquidated by a trustee. Chapter 13 sets up a repayment plan, usually lasting three to five years, allowing you to keep property while catching up on secured debts like a mortgage. Businesses may use Chapter 11 for reorganization, and family farmers can sometimes use Chapter 12.
Texas has robust homestead protections, which can protect equity in your primary residence in many cases. Whether your home is fully protected depends on factors such as acreage limits, how long you have owned the home, whether you choose Texas exemptions, and recent changes in equity. An attorney can evaluate whether your house is likely to be at risk in a Chapter 7 liquidation or whether Chapter 13 might be a better way to keep it and cure arrears.
Yes. The filing of a bankruptcy petition triggers an automatic stay that generally stops foreclosure sales and repossessions while the stay is in effect. In many cases the stay provides breathing room to negotiate with the lender, file a Chapter 13 plan to catch up payments, or otherwise resolve the issue. Creditors can, however, file a motion for relief from stay and may obtain court permission to proceed.
Most student loans are presumptively nondischargeable unless you can prove undue hardship through an adversary proceeding, which is difficult and fact-specific. Recent federal and state tax debts may also be nondischargeable, depending on the type and age of the tax liabilities. A bankruptcy attorney can evaluate which debts are likely dischargeable and which will survive a bankruptcy.
The means test compares your household income to the median income for a household of your size in your state to determine eligibility for Chapter 7. If your income is above the median, you may still qualify for Chapter 7 but will have to pass additional analysis. Failing the means test usually means you must pursue Chapter 13 instead.
A Chapter 7 bankruptcy typically remains on your credit report for up to 10 years from the filing date. A Chapter 13 typically remains for up to 7 years. Even though a bankruptcy appears on credit reports, many people begin rebuilding credit quickly after discharge by responsibly managing credit and using secured or starter credit products.
Most of the filing and many routine matters are handled by your attorney and electronically through the court filing system. You will generally need to attend the 341 meeting of creditors, which is a short proceeding where the trustee asks questions under oath about your petition and finances. Additional court hearings may be necessary if there are objections, contested claims, or motions.
Bankruptcy involves a federal filing fee that is the same nationwide for each chapter, plus attorney fees which vary by attorney and case complexity. Chapter 7 attorney fees are usually a single lump sum, while Chapter 13 attorney fees may be paid through the chapter plan. Some attorneys offer free or low-cost consultations to discuss fees and payment plans. Ask for a clear fee agreement before hiring an attorney.
Once you file, the automatic stay generally prohibits most creditor communications and collection actions. If a creditor continues to call or pursue collection, inform your attorney so they can enforce the stay. Certain creditors, such as for child support or criminal fines, may still take specific actions that are not covered by the stay.
Yes. There are nonprofit legal aid organizations, law clinic programs, and volunteer lawyer programs in the greater Houston area that can help qualifying low-income filers. Some courts provide limited self-help resources for pro se filers, and there are approved credit counseling agencies that provide the mandatory counseling sessions. A local bar association or legal aid referral service can direct you to these options.
Helpful organizations and resources to contact or research include:
- United States Bankruptcy Court - Southern District of Texas, Houston Division - for local court procedures and filing information.
- U.S. Trustee Program, Southern District of Texas office - for information about trustees and bankruptcy administration.
- TexasLawHelp - free legal information and self-help materials tailored to Texas residents.
- Local legal aid organizations and pro bono programs serving the Houston and Katy area, including regional legal aid providers and volunteer lawyer programs.
- Texas State Law Library and county law libraries in Harris, Fort Bend, and Waller counties - for public access to bankruptcy forms and reference materials.
- Approved credit counseling and debtor education providers - completion of these courses is required in every consumer bankruptcy case.
- Local bar associations - to locate experienced bankruptcy attorneys and free or low-cost consultations.
If you are considering bankruptcy in Katy, take the following steps:
- Gather your financial documents - recent pay stubs, tax returns, bank statements, a list of debts and creditors, mortgage and vehicle documents, retirement account statements, and property deeds. These items are essential for any bankruptcy evaluation and filing.
- Attend a consultation with a bankruptcy attorney who practices in the Southern District of Texas and is familiar with Texas exemptions and local court procedures. Bring your documents and be prepared to discuss income, expenses, assets, and goals.
- Complete a court-approved credit counseling course within 180 days before filing. Your attorney or local resources can recommend approved providers.
- Compare options - an attorney should explain Chapter 7, Chapter 13, and alternatives such as negotiation, debt settlement, or loan modification for homeowners.
- If you file, be prepared to attend the meeting of creditors and to complete the required debtor education course after filing to receive a discharge.
- If you cannot afford private counsel, contact local legal aid, bar association referral programs, or pro bono clinics to explore low-cost or no-cost assistance.
Bankruptcy is an important legal decision with long-term consequences. Getting accurate, local advice from a qualified attorney will help you choose the best path for your circumstances and protect your rights under federal and Texas law.
