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Secure a fresh start! The ultimate, step-by-step guide to Bankruptcy.

Posted by Joshua Tisdale | Nov 04, 2022 | 0 Comments

Most of us have faced financial hardships in our life. Sometimes it gets to a point where you are burdened with so many financial problems that you can't see a way out. There is always a last resort, though... Yes, we are talking about bankruptcy. 

Many of us think of it as a financial death sentence. Still, even the wealthiest and most iconic celebrities have faced financial difficulties. Whenever the rich and famous make mistakes or mishandle their finances, they face creditor harassment, foreclosure, and even repossessing their cars and assets. 

Here are two examples of celebrities who declare bankruptcy: 


Mike Tyson 

 According to the New York Times, the famous boxer earned $400 million during his 20-year career. Still, he declared bankruptcy in 2003, owing a total of $23 million. 

Some of his debts were a $9 million divorce settlement, $13.4 million to the IRS, and $4 million to British tax authorities. Tyson recovered his assets thanks to the publication of his memoir in 2013 and a TV show called "Mike Tyson Mysteries." 


Lady Gaga  

"I actually went bankrupt after the first extension of The Monster Ball,"

she said in an interview with the Financial Times, referring to her second international tour, "And it was hilarious because I had no idea!". 

"I used to think this is absurd; I have five top-one singles." And at the same time, I was $3 million deep in debt. 

Her popularity and the quality of her work helped her recover from the financial setback. By the middle of 2018, she had already earned 50 million dollars.  

 The scenarios described above occur daily and can happen to the average Joe. Fortunately, a safety net is in place to help people either wipe out or restructure their debts and start over. So they can catch up and keep their houses and vehicles even if they are behind with the payments. 


When should I consider going bankrupt? 

 Most of us are unaware of the timeline or right moment to start the bankruptcy process or whether we are even eligible to use this resource. Here are some questions to help you get a clear grasp. 


  • Have you recently lost your job? 
  • Have you gone through a divorce? 
  • Do you need more money at the end of the month to pay all your bills? 
  • Have you fallen behind on your utility payments? 
  • Have you discovered that the rates of interest on your loans are increasing? 
  • Do you pay late fees? 
  • Have you consistently missed car payments? 
  • Have you fallen behind on your mortgage payments? 
  • Are you concerned that your car may be repossessed? 
  • Have you received any certified letters? 
  • Have you received a notice of foreclosure? 


If you say yes to 3 or more of these questions, it's time to consider bankruptcy seriously. 


What is Bankruptcy? 

Bankruptcy, fortunately, is a legal vehicle that helps protect one from creditors. This valuable tool provides the fresh start needed on the journey of financial recovery for anyone in a situation where debt is more than they can handle. If you qualify for bankruptcy, filing can prevent lenders from hassling you and trying to seize your assets, allow debts to be absolved, and allow you to keep your assets while you rebuild your life. 

Bankruptcy is a set of federal laws that makes debt relief possible. When your bankruptcy attorney files for bankruptcy protection on your behalf, the court issues a court order known as an automatic stay to protect debt holders from creditor collection actions. 




Chapter 7 of the bankruptcy code is what is known as liquidation bankruptcy. When filing for protection under Chapter 7, debtor assets are subject to liquidation by a bankruptcy trustee responsible for administering the case. Most individuals who file for bankruptcy do not have assets that can be sold or liquidated because they have exemptions or protections on their property that prevent such actions. 


If debtors qualify for a Chapter 7 bankruptcy, they disclose all their property to the Court and Trustee. In a typical case, most of that property is exempt, either by Federal or Texas law, meaning that no one can take it from the debtor. If a debtor has non-exempt property, the Trustee can sell it and use the funds to pay off some of the debtor's unsecured debt. The remaining unsecured debts are discharged. If a Debtor has secured debt, the debtor can either be current and reaffirm the debt, redeem the property that secures the debt or surrender the property and have the underlying debt discharged. 




Chapter 13 of the bankruptcy code consolidates debt into one monthly payment. This allows individuals to catch up on arrears for their mortgages, car notes, and other obligations. Depending on their income, a debtor can pay between 0 and 100% of their unsecured debts. The debtor must pay them to retain ownership if secured debts are attached to their property. 

There are two reasons why a debtor may file a Chapter 13 bankruptcy; they have more income than the median family in the state, or they are attempting to save a home or vehicle that may soon be foreclosed or repossessed. In Chapter 13, the debts, including arrears, are pooled together and paid off over three to five years. If the debtor's income doesn't require them to pay off all of their obligations, whatever is left unpaid at the end of the plan will also be discharged. 


The Benefits of Chapter 7 Bankruptcy and Chapter 13 Bankruptcy 

 With Chapter 7 and Chapter 13, individuals have exciting options that allow them to lower their interest rates on loans, change the status of loans from secured to unsecured and redeem property for fair market values. 

There are four types of bankruptcies, but only two affect most of those filing. 


Do's and Don'ts 



  1. File necessary tax returns. 
  2. Pay secured debts (vehicles, mortgage). 
  3. Stop using credit cards. 
  4. Change your bank account if you owe money to your bank. 
  5. List all assets, including pending lawsuits you have against someone to recover money. 



  1. Don't pay unsecured creditors within 90 days before filing. 
  2. Don't repay friends and family members on debts you owe them. 
  3. Don't purchase luxury items or items that are not necessary (boats, RVs, expensive vehicles, jewelry, etc.). 
  4. Don't gift assets or money. 
  5. Don't transfer or sell property. 
  6. Refrain from withdrawing large sums from investment accounts, etc.  


Bankruptcy is a complicated law area that usually requires lawyers' assistance and expertise. 

 The Tisdale Law Firm's skilled and experienced bankruptcy team knows that even the most well-intended people can face money problems. We can support you in exploring your options under the United States Bankruptcy Code, whether it's Chapter 13 to save your assets or Chapter 7 to wash out most, if not all, of your debts and give you a fresh start. 

If you have any questions about bankruptcy or would like to schedule a consultation with us, please call us today at (254) 634-8600. 










About the Author

Joshua Tisdale

As a father of 9 I understand first hand the issues that most families run into. From child custody and child support, to termination of parental rights and adoption, and even probate, I can empathize with your case. I know how to synthesize information and make it understandable and relatable to...


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