Bankruptcy FAQs

Plain-English answers to your bankruptcy questions

The questions clients ask most — about the basics, your first meeting, alternatives, and the chapters that actually fit different situations.

Bankruptcy is more forgiving — and more strategic — than most people expect. The questions below cover the topics clients ask about most, written in plain English and reviewed by Max Tarbox.

For anything specific to your situation, the right answer comes from a free consultation, not a webpage. Call (806) 686-4448 any time.

Chapters Most People Use

90 d

Typical Chapter 7

Free

Initial Consultation

Texas

Debtor-Friendly Exemptions

01 • The Basics

What is bankruptcy?

A federal legal process that helps people and businesses restructure or eliminate debts they cannot realistically repay. Used at the right moment, it stops collection cold and clears the deck so you can rebuild.

Bankruptcy is federal law, but state law (especially exemptions) plays a major role in determining what you keep. Texas exemptions are among the most generous in the country, so most filers keep their homestead, a vehicle, retirement accounts, household goods, and tools of trade.

02 • First Meeting

Meeting with your attorney

Your first consultation is free. Coming prepared turns a 60-minute meeting into a clear plan. Here's what to bring, what to expect, and what to ask.

Two months of pay stubs (yours and your spouse's), two years of federal tax returns, a complete list of debts with creditor names and balances, a list of assets, three months of bank statements, mortgage and vehicle loan statements, any lawsuits or collection notices, and a government photo ID with your Social Security card.

03 • Other Options

Bankruptcy alternatives

Bankruptcy isn't always the right answer. Debt negotiation, consolidation, credit counseling, and assignment for benefit of creditors all have a place — when they fit.

Settling individual debts directly with the creditor for less than the full balance owed. Works best when you have lump-sum funds and only one or two large debts. Forgiven debt over $600 is generally taxable income unless you qualify for the insolvency exclusion.

04 • Business Reorganization

Chapter 11 considerations

The most flexible — and most strategic — chapter in the Bankruptcy Code. Decisions made in the first 30 days often determine the outcome of the entire case.

Chapter 11 only works if the business can generate enough cash flow to fund a feasible plan after restructuring. We start every case with a viability assessment — sometimes the honest answer is that an orderly Chapter 7 or sale yields more value than reorganizing.

05 • Family Farmers

Considering Chapter 12

A specialized chapter for family farmers and fishermen with regular annual income. It combines a Chapter 13–style repayment plan with farm-specific protections you won't find anywhere else in the Code.

An individual or entity engaged in a farming operation where total debts do not exceed approximately $11 million (subject to periodic adjustment), at least 50% of debt arises from farming, and more than 50% of gross income in the prior tax year came from farming operations.

06 • Reorganization Issues

Common reorganization issues

Four issues come up in nearly every business reorganization — and each one can dramatically reshape outcomes for both the debtor and its creditors.

Contracts and leases where both sides still owe material performance. Section 365 lets the debtor assume (keep, but cure defaults) or reject (terminate; counterparty becomes an unsecured creditor for damages). Nonresidential real-property leases must be assumed or rejected within 120 days of filing.

Don't Wait. The Sooner You Act, the More Options You Have.

Call Now: (806) 686-4448