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Restructuring and insolvency law covers the legal processes that individuals and businesses use when they cannot meet their financial obligations. In McAllen, Texas, these matters are governed by the federal Bankruptcy Code for filings in federal court and by Texas state law for many property, contract, and collection issues that affect insolvency outcomes. Common goals in restructuring and insolvency include preserving going-concern value for businesses, reorganizing debts to allow repayment over time, liquidating assets to satisfy creditors, and stopping collection actions and foreclosures while parties work toward a solution.
Because bankruptcy is a federal process, cases that affect people and companies in McAllen are handled through the federal bankruptcy system that serves the region. At the same time, state rules on exemptions, property, secured transactions, and fraudulent transfers play an important role in determining what property can be protected and how disputes between creditors and debtors are resolved.
Restructuring and insolvency cases raise complex legal, financial, and practical issues. A lawyer who handles these matters can bring experience in federal bankruptcy procedure, state law nuances, creditor negotiation, and court advocacy. Common situations where you should consider hiring a lawyer include:
- Personal debt that you cannot reasonably repay through your current income or assets, and you are considering Chapter 7 or Chapter 13 bankruptcy.
- A small business or corporation facing sustained losses, threatened foreclosure, or creditor litigation and needing a reorganization plan or workout strategy.
- A business or individual facing an imminent foreclosure, repossession, wage garnishment, lien enforcement, or sheriff sale and needing immediate relief.
- A creditor seeking to recover unpaid debts, pursue remedies under secured lending law, or challenge a debtor for fraudulent transfers or preferences.
- Complex matters such as negotiating with secured creditors, arranging debtor-in-possession financing, creating a Chapter 11 plan, or coordinating asset sales under bankruptcy supervision.
Key legal concepts and local laws relevant to restructuring and insolvency in McAllen include federal bankruptcy rules combined with Texas-specific laws and local court practices:
- Bankruptcy is federal - Chapters 7, 11, 12, and 13: Filing for bankruptcy is done under the federal Bankruptcy Code. Chapter 7 is a liquidation process for qualified individuals or businesses. Chapter 13 permits wage earners to reorganize and repay debts over three to five years. Chapter 11 is commonly used for business reorganizations and can be used by individuals with large debts. Chapter 12 is available for family farmers or fishermen who meet eligibility rules.
- Texas exemptions: Texas law provides its own set of bankruptcy exemptions that debtors who live in Texas usually must use. Texas exemptions include broad homestead protections and exemptions for certain retirement accounts and personal property. These exemptions can determine whether a debtor can preserve a home, vehicle, retirement savings, and other assets in a bankruptcy.
- Homestead and community property: Texas has some of the most protective homestead laws in the country, which can shield a homeowner from forced sale in many circumstances. Texas is also a community property state, which affects ownership of property acquired during marriage and can influence what property is available to satisfy creditors in a bankruptcy context.
- Secured transactions and liens: Commercial and consumer secured transactions are governed by Article 9 of the Uniform Commercial Code as adopted by Texas. Lenders may enforce security interests through repossession, foreclosure, or judicial foreclosure depending on the collateral and agreement.
- Fraudulent transfers and preferences: Bankruptcy trustees and creditors may challenge transfers that occurred before bankruptcy filings under federal avoidance powers, often applying state law concepts such as the Uniform Fraudulent Transfer Act as adopted in Texas.
- Local court practice and procedures: Bankruptcy cases are filed in federal bankruptcy court divisions that serve southern Texas. Local rules and standing orders, as well as the practices of trustees, judges, and clerks, impact deadlines, required forms, and hearing procedures.
Chapter 7 generally liquidates nonexempt assets to pay creditors and discharges eligible debts for individuals and businesses. Chapter 13 allows an individual with regular income to keep assets and repay debts over three to five years under a court-approved plan. Chapter 11 is a reorganization option primarily used by businesses to restructure debt and operations, although individuals with larger debts may also use it.
To start a bankruptcy case you must file a petition and related forms in the federal bankruptcy court serving your county. Before filing, individuals must complete credit counseling from an approved agency. The filing triggers the automatic stay, which halts most collection actions. You should consult a bankruptcy attorney to determine the correct chapter and to prepare and file required documents properly.
Not necessarily. Texas offers strong homestead protections and bankruptcy exemptions that may allow you to keep your home. Whether you can keep your house depends on the value of the property, the amount of secured debt against it, available exemptions, and the chapter filed. A lawyer can analyze exemptions and propose strategies such as reaffirmation agreements, redemption, or Chapter 13 repayment plans if needed.
The automatic stay is a federal protection that stops most collection actions, foreclosure, repossession, wage garnishments, and lawsuits against the debtor as soon as the bankruptcy petition is filed. It takes effect immediately upon filing, but certain creditors can seek relief from the stay from the bankruptcy court.
A Chapter 7 bankruptcy generally remains on a credit report for up to 10 years from the filing date. Chapter 13 filings typically remain for up to 7 years. Credit effects vary by lender and individual circumstances, and many people begin rebuilding credit during and shortly after bankruptcy by managing secured credit and timely payments.
Often yes. In Chapter 11, businesses frequently continue operations as debtor-in-possession while they implement a reorganization plan. Sole proprietors may use Chapter 7 or Chapter 13 with different consequences for the business. A lawyer can advise on operational, licensing, and contract issues that arise during the case.
Alternatives include negotiating with creditors for settlements or modified payment plans, informal workouts, loan refinancing, debt consolidation, using state foreclosure mediation programs when available, or business restructuring outside of court. An attorney or credit counselor can evaluate these options in your situation.
Costs vary by complexity, chapter selected, and attorney experience. Consumer Chapter 7 cases often have a flat fee, while Chapter 13 and Chapter 11 matters usually involve higher fees and may include hourly billing for complex issues. During a consultation ask about fee structure, retainer requirements, and what services are included.
The means test is a formula used to determine whether an individual consumer qualifies for Chapter 7 bankruptcy based on household income and certain allowable expenses. If your income is too high under the means test, you may be required to file Chapter 13 instead. A lawyer can help calculate eligibility and consider alternative approaches.
Before you file, creditors can continue preexisting actions such as lawsuits, garnishments, or foreclosure. Once you file a bankruptcy petition, the automatic stay typically halts most of these actions. If a foreclosure sale or other critical event is imminent, consult an attorney immediately because timing and emergency filings can matter.
Below are organizations and resources that can help you learn more or get direct assistance in restructuring and insolvency matters in the McAllen area:
- U.S. Bankruptcy Court serving southern Texas - for filing procedures, local rules, and court forms.
- U.S. Trustee Program - supervises bankruptcy administration and maintains lists of approved credit counseling and debtor education providers.
- Texas State Law Library - legal research materials and guidance on Texas law and procedure.
- State Bar of Texas - lawyer referral information and consumer resources on hiring attorneys.
- Hidalgo County Clerk - local records and public filings related to state court judgments and liens.
- Texas RioGrande Legal Aid - legal assistance programs that may serve low-income residents of the Rio Grande Valley.
- Local bar associations - for referrals to attorneys experienced in bankruptcy and insolvency law.
- Approved credit counseling agencies - required for individuals before filing bankruptcy and for debtor education after filing.
If you are facing financial distress and may need restructuring or insolvency assistance, consider this practical path forward:
- Gather documents - assemble recent pay stubs, tax returns, bank statements, a list of creditors, loan documents, titles, deeds, and business financial statements if applicable.
- Get a preliminary consultation - meet with an experienced bankruptcy or restructuring attorney to review your situation, explain likely options, and identify urgent deadlines.
- Complete required counseling - individuals must complete credit counseling from an approved agency before filing and debtor education after filing to receive a discharge.
- Understand costs and timelines - ask your attorney about fees, expected court dates, likely durations for each chapter, and the impacts on assets and credit.
- Consider alternatives - based on advice, weigh informal workouts, negotiated settlements, or state remedies against a bankruptcy filing.
- Prepare to act quickly when necessary - if foreclosure, repossession, or a sheriff sale is imminent, prompt legal action can be critical to preserve options and obtain relief from the court.
Important note - This guide is for informational purposes only and does not create an attorney-client relationship or constitute legal advice. For advice about your specific situation, consult a qualified bankruptcy or insolvency attorney in the McAllen area. An attorney can provide tailored guidance based on federal and Texas law and the facts of your case.
