Texas Bankruptcy Guide — Chapter 7 & 13
Chapter 7 and Chapter 13 bankruptcy in Texas — exemptions, the automatic stay, means test eligibility, and what property you can protect
Bankruptcy is a federal court process that can stop collection actions, discharge qualifying debts, and provide a structured path to financial stability. The two most common consumer chapters — Chapter 7 (liquidation) and Chapter 13 (repayment plan) — follow different paths but both begin with the automatic stay that halts garnishment, foreclosure, and other collection activity the moment you file.
Texas requires debtors to use state exemptions — federal bankruptcy exemptions under §11 U.S.C. § 522(d) are not available.
The two most common consumer chapters
Chapter 7: Liquidation discharge
Chapter 7 eliminates most unsecured debts (credit cards, medical bills, personal loans) in approximately 3-4 months §11 U.S.C. § 727. A Trustee reviews your assets, but many Chapter 7 cases are "no-asset" — meaning exemptions protect everything the debtor owns. Eligibility requires passing the Means test §11 U.S.C. § 707(b), which compares your household income to Texas's median.
Chapter 13: Repayment plan
Chapter 13 reorganizes debt into a 3-to-5-year repayment plan §11 U.S.C. § 1322. It is designed for people with regular income who need to catch up on secured debts (mortgage arrears, car loans) or who earn too much to qualify for Chapter 7. At the end of the plan, remaining qualifying unsecured debts are discharged.
Chapter 7 vs. Chapter 13 at a glance
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Purpose | Eliminate unsecured debt (fresh start) §11 U.S.C. § 727 | Reorganize debt into a repayment plan §11 U.S.C. § 1322 |
| Timeline | 3–4 months §11 U.S.C. § 727 | 3–5 years §11 U.S.C. § 1322 |
| Who qualifies | Must pass the Means test §11 U.S.C. § 707 | Regular income required §11 U.S.C. § 109 |
| Property at risk | Non-exempt assets may be liquidated §11 U.S.C. § 704 | You keep all property §11 U.S.C. § 1306 |
| Mortgage arrears | Cannot cure — may lose home §11 U.S.C. § 362 | Can cure arrears over plan period §11 U.S.C. § 1322 |
| Car loans | Must be current or surrender §11 U.S.C. § 521 | Can restructure payments §11 U.S.C. § 1325 |
| Tax debt | Limited (must meet 3-year/2-year/240-day rules) §11 U.S.C. § 523 | Can pay over plan period §11 U.S.C. § 1322 |
| Credit impact | Stays on report 10 years §15 U.S.C. § 1681c | Stays on report 7 years §15 U.S.C. § 1681c |
| Repeat filing | 8-year wait after prior Ch. 7 discharge §11 U.S.C. § 727 | 2-year wait after prior Ch. 13 discharge §11 U.S.C. § 1328 |
Texas exemptions at a glance
- Homestead: unlimited value (10 acres urban / 100 acres rural single / 200 acres rural family) §41.001–41.002
- Personal property: $50,000 per single adult / $100,000 per family (aggregate of enumerated categories) §42.001
- Wages: current wages for personal services are exempt; unpaid commissions for personal services are exempt up to 25% of the aggregate personal property limits and are included in that aggregate (Tex. Prop. Code § 42.001(d)) §42.001(b)(1)
- Retirement: ERISA-qualified plans, IRAs, Roth IRAs, Keogh plans, 401(k), 403(b), and state/county retirement systems (including TRS and ERS) are fully exempt §42.0021
What the Automatic stay does immediately §11 U.S.C. § 362
The moment a bankruptcy petition is filed, the Automatic stay takes effect. This federal court order immediately halts:
- Wage Garnishment
- Foreclosure proceedings
- Repossession attempts
- Collection calls and letters
- Utility shutoffs (for 20 days)
- Most pending lawsuits against the debtor
Debts that survive bankruptcy §11 U.S.C. § 523
- Most tax debts less than 3 years old
- Domestic support obligations (child support, Alimony)
- Student loans (absent a showing of undue hardship)
- Debts arising from fraud, embezzlement, or willful injury
- Court-ordered Restitution and certain fines
When timing matters most
Filing too early can waste an exemption opportunity or miss a critical deadline. Filing too late can mean lost property, completed garnishment, or foreclosure sale. The decision about when to file is often as important as the decision about whether to file.
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Frequently Asked Questions
General answers to common questions. Specific outcomes depend on your facts and timing.
If you have a deadline, court notice, or upcoming hearing, mention it when requesting assistance so timing can be evaluated promptly.
- Takes effect immediately upon filing
- Prior dismissed cases within 1 year may limit stay to 30 days or eliminate it entirely
- Below-median income generally passes; above-median triggers detailed expense analysis
- Uses 6-month lookback of current monthly income
- Homestead: unlimited value (10 acres urban / 100 acres rural single / 200 acres rural family)
- Texas requires use of state exemptions — federal exemptions under [§ 11 U.S.C. § 522(d)] are not available