Chapter 13 Bankruptcy in Texas
Learn how Chapter 13 bankruptcy in Texas works, who qualifies, repayment plans, costs, and how it can stop foreclosure while protecting your assets.
Many Texans face overwhelming debt that makes it hard to keep up with mortgages, car payments, or daily living expenses. When bills pile up, Chapter 13 bankruptcy can provide a path to regain control without losing valuable property. This legal process allows individuals with steady income to restructure debts into a manageable repayment plan, often protecting homes from foreclosure. Understanding how Chapter 13 works in Texas is important for anyone considering bankruptcy as a way to rebuild financial stability.
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What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a legal process that allows individuals to repay their debts over time. Instead of selling assets as in Chapter 7, Chapter 13 sets up a repayment plan that lasts 3 to 5 years. During this time, you make monthly payments that fit your budget. It is often called the “wage earner’s plan” because a steady income is required to qualify.
Chapter 13 bankruptcy is a legal process that allows individuals to repay their debts over time. Instead of selling assets as in Chapter 7, Chapter 13 sets up a repayment plan that lasts 3 to 5 years. During this time, you make monthly payments that fit your budget. It is often called the “wage earner’s plan” because a steady income is required to qualify.
Who Can File for Chapter 13 in Texas?
Not everyone qualifies for Chapter 13. To file, you must have regular income from a job, business, or retirement benefits. Your total debts must also be within certain legal limits. In Texas, people often choose Chapter 13 when they need to stop foreclosure, prevent car repossession, or manage overdue tax debts.
Not everyone qualifies for Chapter 13. To file, you must have regular income from a job, business, or retirement benefits. Your total debts must also be within certain legal limits. In Texas, people often choose Chapter 13 when they need to stop foreclosure, prevent car repossession, or manage overdue tax debts.
How Does the Repayment Plan Work?
After filing, the court helps create a repayment plan based on your income and living expenses. The plan usually lasts 3 to 5 years. You make one monthly payment to a bankruptcy trustee, who distributes the money to creditors. For example, a Texas family earning $4,000 per month may agree to pay $800 each month toward debts, leaving enough for housing, food, and utilities. The court must approve the plan before it begins.
After filing, the court helps create a repayment plan based on your income and living expenses. The plan usually lasts 3 to 5 years. You make one monthly payment to a bankruptcy trustee, who distributes the money to creditors. For example, a Texas family earning $4,000 per month may agree to pay $800 each month toward debts, leaving enough for housing, food, and utilities. The court must approve the plan before it begins.
What Debts Are Included or Excluded?
Not all debts are treated the same way.
Debts that can be included and reduced:
Not all debts are treated the same way.
Debts that can be included and reduced:
- Credit card bills
- Medical debts
- Personal loans
- Child support
- Alimony
- Certain taxes
- Student loans
Can Chapter 13 Stop Foreclosure or Repossession?
Yes. One of the biggest advantages of Chapter 13 in Texas is that it can stop foreclosure on your home or repossession of your car. As soon as you file, an “automatic stay” goes into effect, stopping creditors from collecting debts or seizing property. For example, if your house in Dallas is about to be auctioned, Chapter 13 can give you a chance to catch up on missed payments through the repayment plan.
Yes. One of the biggest advantages of Chapter 13 in Texas is that it can stop foreclosure on your home or repossession of your car. As soon as you file, an “automatic stay” goes into effect, stopping creditors from collecting debts or seizing property. For example, if your house in Dallas is about to be auctioned, Chapter 13 can give you a chance to catch up on missed payments through the repayment plan.
Impact on Property and Assets
Unlike Chapter 7, which may involve selling assets, Chapter 13 usually lets you keep your house, car, and other property. Texas has strong homestead protections, which help safeguard your primary residence. However, you must keep up with your repayment plan and ongoing mortgage or car payments.
Unlike Chapter 7, which may involve selling assets, Chapter 13 usually lets you keep your house, car, and other property. Texas has strong homestead protections, which help safeguard your primary residence. However, you must keep up with your repayment plan and ongoing mortgage or car payments.
What Happens if Your Income Changes During the Plan?
Life can change during a 3- to 5-year plan. If you lose your job or your income decreases, you may not be able to keep up with payments. In that case, you can ask the court to adjust your plan. Sometimes payments are reduced, or in special cases, debts may be forgiven early. If payments stop completely without court approval, the case can be dismissed and creditors may start collections again.
Life can change during a 3- to 5-year plan. If you lose your job or your income decreases, you may not be able to keep up with payments. In that case, you can ask the court to adjust your plan. Sometimes payments are reduced, or in special cases, debts may be forgiven early. If payments stop completely without court approval, the case can be dismissed and creditors may start collections again.
Cost of Filing Chapter 13 in Texas
Filing Chapter 13 comes with costs. Court filing fees are a few hundred dollars. Attorney fees in Texas usually range from $3,000 to $5,000, but many lawyers allow clients to pay fees through the repayment plan. The bankruptcy trustee also takes a small percentage of each payment. Even though the process is not cheap, it often helps people save their homes and stop creditor harassment.
Filing Chapter 13 comes with costs. Court filing fees are a few hundred dollars. Attorney fees in Texas usually range from $3,000 to $5,000, but many lawyers allow clients to pay fees through the repayment plan. The bankruptcy trustee also takes a small percentage of each payment. Even though the process is not cheap, it often helps people save their homes and stop creditor harassment.
Effect on Credit Score & Future Finances
Chapter 13 will appear on your credit report for up to 7 years. In the short term, your credit score may drop. However, completing the plan shows that you took responsibility to repay debts, which may help in the long run. Many Texans rebuild credit by using secured credit cards, taking small loans, and budgeting carefully after discharge.
Chapter 13 will appear on your credit report for up to 7 years. In the short term, your credit score may drop. However, completing the plan shows that you took responsibility to repay debts, which may help in the long run. Many Texans rebuild credit by using secured credit cards, taking small loans, and budgeting carefully after discharge.
Alternatives to Chapter 13
Before filing, consider other options:
Before filing, consider other options:
- Credit counseling: An agency may help you make affordable payment plans.
- Debt settlement: Negotiating with creditors to lower what you owe.
- Chapter 7 bankruptcy: A quicker process, but you may lose some property.
Key Takeaways
- Chapter 13 creates a repayment plan lasting 3 to 5 years.
- It helps Texans save homes and cars from foreclosure or repossession.
- Some debts, like child support and student loans, cannot be discharged.
- Filing costs include court fees, attorney fees, and trustee fees.
- Chapter 13 affects your credit, but rebuilding is possible with time and discipline.
Bottom Line
Chapter 13 bankruptcy in Texas can be a powerful tool for people who want to keep their property while managing overwhelming debt. It provides breathing room, stops foreclosure, and allows you to catch up on missed payments. However, it requires discipline, steady income, and long-term commitment. If you are considering this option, weigh the pros and cons carefully and speak with a qualified Texas bankruptcy attorney to make the best decision for your financial future.
Chapter 13 bankruptcy in Texas can be a powerful tool for people who want to keep their property while managing overwhelming debt. It provides breathing room, stops foreclosure, and allows you to catch up on missed payments. However, it requires discipline, steady income, and long-term commitment. If you are considering this option, weigh the pros and cons carefully and speak with a qualified Texas bankruptcy attorney to make the best decision for your financial future.
Legal Disclaimer
This article is for informational purposes only and does not provide legal advice. Bankruptcy laws are complex, and every case is different. If you are thinking about filing Chapter 13 bankruptcy in Texas, consult a licensed bankruptcy attorney to understand your rights and options.
This article is for informational purposes only and does not provide legal advice. Bankruptcy laws are complex, and every case is different. If you are thinking about filing Chapter 13 bankruptcy in Texas, consult a licensed bankruptcy attorney to understand your rights and options.
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