Financial Law — Texas Legal

Bankruptcy

Bankruptcy’s Legal Foundation

Federal bankruptcy law, laws passed by Congress, mandate bankruptcy procedures, combined with local rules of court. On the other hand, state laws (passed by the individual states), outline property rights in the form of property exemptions. Exemptions list the property that can’t be taken during bankruptcy proceedings.

Both Individuals and Businesses are Eligible for Bankruptcy Protection

Both individuals and businesses can file for bankruptcy protection, if they meet certain qualifications.

Individuals (and Married Couples)

Typically, individuals file either a Chapter 7 or Chapter 13 bankruptcy petition. For most, when the bankruptcy petition has been accepted, the court issues a “stay” and all creditor attempts at collection must end. In other words, the phone calls, foreclosures, and most wage garnishments stop, immediately.

Chapter 7

Chapter 7 is a liquidation bankruptcy. If qualified to file by meeting a “means” test, your debts will be discharged. This means that they go away and you never have to pay them again. Chapter 7 is referred to a “liquidation” bankruptcy because if you have assets in excess of your state’s (or, federal, if permissible) exemptions, those assets are taken and sold by the bankruptcy trustee to pay off your creditors.
It sounds scarier than it is; most people who file Chapter 7 are covered by the exemptions. This means they can keep most, or all, of their property, including their house and car, as long as they can make future payments. If your equity exceeds the applicable exemptions, you can purchase your property at the wholesale cost, not what you owe. Some debts cannot be discharged such as most taxes, child support, alimony, student loans, and criminal debts.

Chapter 13

Chapter 13 is a reorganization bankruptcy also known as “wage earners” bankruptcy. If qualified, you are able to pay your debts through a three to five year payment plan. Some unsecured debts may be discharged or reduced and interest and penalties are eliminated.
For example, in today’s economic climate, often second and third mortgages can be discharged if they are unsecured because the value of the home has decreased.
Assets are not seized if as the individual can make future payments, in addition to the debt repayment plan payments. In other words, the Chapter 13 petitioner must be a wage earner or, otherwise, have sufficient income to make all payments.
Businesses

Foreclosures

In today’s economic climate, millions of homes are being foreclosed upon. A bank or financial institution initiates foreclosure proceedings when mortgage payments are missed. When a home is foreclosed upon, the bank (i.e. mortgagor) owns the home and sells it to pay off the original mortgage.

It’s possible to halt or stop foreclosures. For example, upon the acceptance of a bankruptcy petition, the court issues a “stay” which means that creditors must immediately cease all collection practices.

Loan Agreements

A loan agreement is a contract between a borrower and a lender that regulates the mutual promises made by each party. There are many types of loan agreements, including “facilities agreements,” “revolvers,” “term loans,” and “working capital loans.” Loan agreements are documented via a compilation of the various mutual promises made by the involved parties.

Prior to entering into a loan agreement, the “borrower” first makes representations about his affairs surrounding his character, creditworthiness, cashflow, and any collateral that he may have available to pledge as security for a loan. These representations are taken into consideration and the lender than determines under what conditions (terms), if any, they are prepared to advance money.

Loan agreements, like any contract, reflect an “offer,” the “acceptance of the offer,” “consideration,” and can only involve situations that are “legal” (a term loan agreement involving heroin drug sales is not “legal”). Loan agreements are documented via their commitment letters, agreements that reflect the understandings reached between the involved parties, a promissory note, and a collateral agreement (such as a mortgage or a personal guarantee). Loan agreements offered by regulated banks are different from those that are offered by finance companies in that banks receive a “banking charter” granted as a privilege and involving the “public trust.”

Loan agreements are usually in written form, but there is no legal reason why a loan agreement cannot be an oral contract (although they are more difficult to enforce).

Real Estate

Real estate law encompasses all laws pertaining to real property. Real property is real estate such as land, a home, an apartment, or a condominium. Real property is distinguished from personal property which is investments, money, jewelry, and art.

Common Real Estate Law Focuses

Buying a Home
Renting a Home
Selling a Home
Foreclosure
Mortgages

Buying a Home

Buying a home includes a multitude of legalities including the offer, acceptance, contract, inspections, local ordinances and requirements, and mortgages. A real estate lawyer often handles the title search, preparation of the new deed, and the real estate closing.

Renting a Home or Apartment

Renting a home includes landlord–tenant laws and a lease agreement. Both the landlord and the tenant also deal with security deposit, local laws and ordinances, evictions, the implied warranty of habitability, maintenance requests, and liability issues.

Tenants have the right not to be discriminated against. A landlord cannot avoid renting to someone because of the prospective tenant’s race, religion, color, nationality, sex, age, familial status, physical disability, or mental disability.

Tenants also have the right to habitable conditions. The home or apartment has to be safe; for example, there should be heat and running water and there should be no major structural problems, pest infestations, or lead paint issues.

The landlord has the right to be paid the rent as agreed upon in the lease. If the tenant fails to pay the rent and follow other reasonable rules as outlined in the lease, the landlord’s recourse is eviction.

Selling a Home

Selling a home includes a multitude of legalities including the offer, acceptance, contract, inspections, local ordinances and requirements, and mortgages. A real estate lawyer often handles the title search, preparation of the new deed, and the real estate closing.

Foreclosure

Mortgages

Most homes today are purchased with the financial help of a mortgage. A mortgage is a loan that is secured by real estate. Both financial institutions, such as banks and mortgage companies, and individual home sellers can give mortgages.

The person who gives a mortgage is called the “mortgagor;” the person who is given the loan (i.e. mortgage) is the “mortgagee.”

Home equity loans are a second or third mortgage that is secured to the real property. Home equity loans are used to improve the property, thus increasing the value of the real property, or to pay off other debts, which of course, does not increase the value of the property.

Social Security/Disability

The Social Security and Supplemental Security Income disability programs are the largest of several Federal programs that provide assistance to people with disabilities. While these two programs are very different, both are administered by the Social Security Administration and only individuals who have a disability and meet medical criteria may qualify for benefits under either.

Social Security Disability Insurance provides benefits to you and certain members of your family if you are “insured,” meaning that you worked long enough and paid Social Security taxes.

Supplemental Security Income pays benefits based on financial need.

Tax Law

Tax Law covers the rules, policies and laws that oversee the tax process, which involves charges on estates, transactions, property, income, licenses and more by the government. Taxation also includes duties on imports from foreign countries and all compulsory levies imposed by the government upon individuals for benefit of the state.

The intricate body of tax law covers payment of taxes to a minimum of four levels of government, either directly or indirectly. Indirect taxes are assessed against products and services that are meant to be consumed, but are paid to an intermediary. For example, when you buy coffee at a local corner store, the retailer charges you tax on your coffee, which he/she subsequently pays to the government. Direct taxes are those you pay directly to the government and are imposed against things like land or real property, personal property, and income.

There is a seemingly endless list of entities that create and enforce tax laws and collect tax revenues. They range from the local government level, such as cities and other municipalities, townships, districts and counties to regional, state and federal levels. They include agencies, transit districts, utility companies, and schools, just to name a few.

This area of tax law is exceedingly complex and in constant flux. The first reason is that the tax code has been used increasingly more often for objectives other than raising revenue, such as meeting political, economic and social agendas. The second reason is the manner in which the tax code is amended.