Business Bankruptcy in Dallas: 5 Facts About the Northern District of Texas

If you own a business in the Dallas area and you’re thinking about filing bankruptcy in Texas, there are five facts you’ll want to know about the bankruptcy court that covers you, the Northern District of Texas. Where your business has been in the six months prior to filing will determine where you can file bankruptcy. A company needs a lawyer to file bankruptcy. Do not pay cash to the court. A corporation or partnership filing bankruptcy under Chapter 7 will have no discharge. If a bankruptcy filing is not filed in good faith, it may be dismissed.

Filing Your Business Bankruptcy Case

A corporation or partnership may file for bankruptcy in the location where most of its assets have been over the past six months or where its office has been. If a business has moved locations during the six months prior to filing for bankruptcy, you’ll want to check with your bankruptcy lawyer to make sure your business’s case is filed in the right bankruptcy court. The Dallas division serves the counties Dallas, Ellis, Hunt, Johnson, Kaufman, Navarro and Rockwall. The Dallas bankruptcy clerk is located at the Earle Cabell Federal Building, at 1100 Commerce Street, Room 1254, Dallas, Texas, 75242.

You will need a bankruptcy lawyer to file for bankruptcy for a corporation or partnership under any Chapter bankruptcy case. A bankruptcy case is never a good do it yourself project. If a bankruptcy case is filed without a lawyer, the case may be dismissed without notice.

The filing fee for a chapter 7 (liquidation) bankruptcy is $338 for a corporation or partnership. Chapter 11 corporate bankruptcy (reorganization) filing fee is $1,738. This does not include attorney’s fees. The price may change in the future. Any filing fee must be paid by cashier’s check or money order. Personal or business checks, cash or debit cards cannot be used to pay the filing fee.

You may think if you can file a Chapter 7 bankruptcy, you’ll get rid of the debt. A Chapter 7 filing for a corporation or partnership is not the same as a personal Chapter 7 bankruptcy. The bankruptcy code does not provide a discharge under Chapter 7 for partnerships or corporations. You do not get your debts wiped out. This is because a partnership or corporation is not a person and doesn’t qualify for a debt wipe out bankruptcy. If your business does file Chapter 7, for cases filed on or after May 1, 2024, in the Northern District of Texas, the creditors meeting will usually be by Zoom video conference. However, the U.S. Trustee who handles your case may allow other types of meetings. In rare cases, the trustee may also tell you to come in person.

If you want to reorganize instead, a business corporation or partnership can qualify for Subchapter V if its aggregate claims are not more than $3,424,000, the limit since April 1, 2025. Congress passed H.R. 7730. The bill increases the debt limit to qualify for Subchapter V to $7.5 million. Before it becomes law, the bill must be signed by the President. These changes have not been signed into law yet, as of October 1, 2026. A Subchapter V bankruptcy generally needs to have a plan filed by the business entity within 90 days of filing.

Bad Faith

If a bankruptcy is filed in bad faith, the court may throw it out. One important case was filed in Dallas on January 15, 2021. The National Rifle Association filed Chapter 11 while the New York attorney general was suing to dissolve the organization.

It was in 2017 when the New York attorney general started investigating. By 2020, New York had sued to try to break up the NRA, for self-dealing. Instead, the NRA said it was dumping New York and heading for Texas. The former vendor Ackerman McQueen motioned to throw the case out, with New York and D.C. attorneys general following. Twelve days of trial began April 5.

Judge Harlin Hale dismissed the case on May 11, 2021. The court determined the NRA did not file to save a going concern, but for an unfair advantage in litigation. The court observed the NRA was solvent when it filed. It did not need to file to get its finances straightened out. The organization’s top officer decided on his own to authorize the filing, without consulting the board of directors. Finally, the NRA used inflammatory language to announce the bankruptcy and decision to leave New York state, which swayed the judge to dismiss the case.

The NRA’s lawyers also argued that a judge could only check for evasion of a single provision (in this case, Section 5 of the Securities Act of 1933). The court rejected the NRA’s attempt. Congress, the judge said, did not intend to endorse using the federal bankruptcy code to dodge state police powers. Judges must check for evasion of any state police power.

The bankruptcy didn’t stick but it wasn’t banned. There was no trustee or examiner since the group was solvent. It could pay off any debts to its creditors without a bankruptcy. It could give bankruptcy another shot (chancing a trustee) or come to terms with the state outside court. The court also was clear a case could be filed during a dissolution suit. There was no absolute rule one way or the other.

Section 1112(b) says a judge should throw out a Chapter 11 for “cause” unless putting in a trustee or examiner helps creditors and the estate most. In the Fifth Circuit, lack of good faith is cause. A filing that has no valid bankruptcy purpose is not in good faith. In Texas, the party that seeks dismissal of the case must first make a prima facie case. Only after that showing will the court shift the burden on the debtor to prove good faith. The court weighs the totality of the circumstances and looks at the facts as a whole. Other circuits, such as Delaware in the Third Circuit require the debtor to prove good faith from the start. That makes dismissal easier for the creditor. In New York, creditors must prove both objective and subjective bad faith. That gives a debtor in New York more protection than you have here in Dallas. Where you file matters since different circuits have different standards.

Some Things Can Be Learned from the NRA’s Case

You may not be the NRA. An accurate statement of your purposes is always the safest route. Then say the same thing, over and over, everywhere. Your press release, your FAQs for vendors, customers and employees all have to sing the same song. Even internal documents can be scrutinized, so every single thing your company puts on paper could wind up in a court filing. The board and managers should actually meet and deliberate the choice to file before you decide. Another important lesson is to consult counsel early in the process to vet the communications that will be released and issued to the public.

Whether you want to try to keep your company open or wind it down, there are many more decisions you need to make, no matter if your company is huge, small, or in between. Knowing what to expect is vital.