1. Personal bankruptcies are down….
Data from the United State Bankruptcy Court’s Northern District of Texas shows personal bankruptcy filings have dropped steadily since reaching a high watermark in 2010, aside from a slight 2017 increase.
Personal bankruptcies dropped across the United States for 13 years straight. While the U.S. economy as a whole has improved since the dark days of the 2008 financial crisis, one particular factor could be driving the overall bankruptcy filing decrease.
News website QZ reported the decline started the same year Congress passed the Affordable Care Act. The article reads the ACA, also known as “Obamacare,” may have helped cut bankruptcies by anywhere from 10% to 50%.
Allen St. John of Consumer Reports said while bankruptcy courts don’t ask debtors why they file, many experts agree medical debt was a leading personal bankruptcy cause before healthcare coverage expanded under the ACA.
Partisans on either side of the aisle have long argued about the link between medical debt and personal bankruptcy. A 2009 study co-authored by now U.S. Senator Elizabeth Warren found medical expenses contributed to 62% of personal bankruptcies in 2007. A 2017 Consumer Reports bankruptcy data showed expanded health insurance access helped cut personal bankruptcy filings by half.
However, a more recent study from the National Bureau of Economic Research claims the ACA caused less than 3% of the bankruptcy decline, when not taking into account the effects of health care exchanges and more comprehensive insurance plans.
2. … But business bankruptcies are up
Chapter 11 filings started climbing again in 2016, according to the Northern District of Texas’s website. Cases filed jumped from 168 in 2015 to 241 in 2016, reaching 447 by 2018.
As the Dallas/Fort Worth area undergoes rapid and sustained economic growth, more businesses either start or move to the area – resulting in more bankruptcies.
The Houston Chronicle reported business bankruptcies almost reached the high levels hit during the U.S. economic recession.
Bankruptcy attorney Ian Peck told the Chronicle energy, retail, healthcare and hospitality industries lead that bankruptcy wave. Governmental uncertainty regarding healthcare drives those bankruptcies according to experts, while mounting debt loads are pushing many energy companies to file for Chapter 11.
Energy industry bankruptcies cause a ripple effect though businesses that support energy and petrochemical companies as well, pushing many of them to file bankruptcy too.
3. Texas gets more bankruptcies than many other states
Bankruptcy restructuring attorney Jeremy Johnson told the Dallas Morning News Texas gets a “disproportionate share of bankruptcies” not because of any particular economic stresses in the state. Texas sees so many bankruptcies because the state is a “favorable venue for debtors that are trying to reorganize.” Texas has also cultivated a reputation for highly skilled bankruptcy attorneys and judges as well.
Texas bankruptcy exemptions are far more generous than those offered under federal bankruptcy laws. The state’s homestead exemption is unlimited aside from acreage limits based on the property’s location. Federal laws only exempt $23,675 of equity in a “principal place of residence.”
Texas’s largesse covers personal property as well. While federal law only protects $12,625 of aggregate value on household goods, Texas exempts up to $100,000 for families and $50,000 for single adults without a family. That figure includes clothing, food, animals, some jewelry and up to two firearms.
Texas bankruptcy law also exempts the entire value of one motor vehicle per licensed household member; federal laws only exempt $3,775 worth of value.
The state’s generous bankruptcy exemptions partially explain why Texas sees so many bankruptcy cases. Texas’s thriving economy and business environment helps explain it as well, as more people and businesses moving into the state means more bankruptcies as well.
4. Texas debtors can keep their homes
A common media trope regarding bankruptcy is debtors losing their homes. Luckily, Texans who file for bankruptcy can keep their home thanks to provisions in the state’s bankruptcy laws. The Texas homestead exemption lets debts keep their homes as long as they keep paying their mortgage and tax payments on time. This applies to those who own their homes outright, so long as they continue paying their taxes. These homestead exemptions only extent to those who live in Texas for at least 40 months before claiming a homestead exemption in their bankruptcy filings.
Those who file bankruptcy in Texas can not only exempt their homes but the property on which it sits, up to ten acres within a city and 100-200 in rural areas. They can also exempt clothing, furniture, heirlooms and other belongings, as well as one vehicle for each family member that holds a driver’s license.
5. Texas debtors can rebuild their credit
It might seem counterintuitive but you can regain credit after your bankruptcy concludes. Since you neither owe anyone any money nor are you eligible for bankruptcy for another eight years, you are ideally suited to opening credit lines. Many bankruptcy clients begin receiving credit offers shortly after completing bankruptcy. Secured loans offered by credit unions or smaller banks is one way to rebuild one’s credit. Secured credit cards offer another avenue for rebuilding credit, backed by a deposit defining that card’s borrowing limit. A co-signed credit card or loan can also help your credit score as long as you have a trusted friend or family member with good credit history willing to co-sign.
Regardless of which path you take, it is imperative you make your payments on time and maintain relatively low balances on any credit cards. Diligent repayment and responsible borrowing will help you rebuild positive credit and set your financial history right again.
Bankruptcy is not the end of your financial world: it’s just a restart and reorganization. Bankruptcy lets you pause your financial problems and give you time and breathing room. With a little tenacity and help from a qualified Dallas bankruptcy expert, you can sort out your financial problems and find the best solution for you. Whether Chapter 7 or Chapter 13 bankruptcy is your best option, the Dallas bankruptcy lawyers of Allen Stewart, P.C. can help you. Your initial consultation with our experts is free and the longer you wait, the fewer options you have and the harder recovery will be. Contact us today.