For many Texans, overwhelming debt creates difficult choices about how to regain financial stability. U.S. bankruptcy law provides two options to persons struggling with unmanageable debt: liquidation under Chapter 7 or reorganization under Chapter 13.
Each path offers a different approach—one focused on the discharge of debt and the other on establishing new payment arrangements with creditors. Understanding the eligibility requirements, advantages, and long-term consequences of each is essential when choosing bankruptcy in Texas.
Let’s understand the key differences so you can make an informed decision.
What Is Chapter 7 Bankruptcy in Texas?
Chapter 7 bankruptcy in Texas is often called “liquidation bankruptcy.” It applies to individuals, partnerships, and businesses, though individuals must pass a means test to qualify. A court-appointed trustee gathers and sells non-exempt property and distributes proceeds to creditors in order of priority. Most remaining unsecured debts are discharged.
Exemptions under state or federal law allow debtors to keep certain property, such as a house, car, and certain personal items. Retirement assets are generally exempt from the bankruptcy estate. Because Texas has some of the most liberal bankruptcy exemptions in the country, many Chapter 7 debtors can liquidate debt and keep most of their assets.
What Is Chapter 13 Bankruptcy in Texas?
Chapter 13 bankruptcy in Texas lets debtors keep their property while setting up new payment arrangements with creditors, allowing them to settle their debts over three to five years. To qualify for Chapter 13 reorganization, a debtor must have a steady income and stay within federal debt limits.
The repayment plan helps catch up on mortgages, car loans, and other arrears through one consolidated payment.
A major benefit of Chapter 13 bankruptcy is stopping foreclosure and repossession while giving time to regain financial stability, making it ideal for those with a reliable income who need structured debt relief.
Key Differences Between Chapter 7 and Chapter 13
In Texas, both Chapter 7 and Chapter 13 bankruptcies provide debt relief, but they operate in very different ways. Below is a clear comparison:
| Aspect | Chapter 7 | Chapter 13 |
|---|---|---|
| Eligibility | Must pass the means test* | Regular income required |
| Process length | 3–6 months | 3–5 years |
| Property impact | Non-exempt assets may be taken by the bankruptcy trustee | You can generally keep assets, repay over time |
| Debt types | Best for unsecured debt | Can address secured debts |
| Credit impact | Stays on record for 10 years | Stays on record 7 years |
*Note: The means test is a calculation used in bankruptcy law to determine if an individual qualifies for Chapter 7 bankruptcy. If you don’t pass the means test, your only option is Chapter 13.
Factors To Consider When Choosing Bankruptcy in Texas
When choosing between Chapter 7 and Chapter 13 in Texas, consider the following:
- Income stability – Can you commit to a long-term repayment plan, or is income too limited?
- Type and amount of debt – Secured vs. unsecured obligations affect eligibility and outcomes.
- Value of protected assets – Review what falls under strong Texas bankruptcy exemptions.
- Urgency of relief – Imminent foreclosure, repossession, or wage garnishment may require faster action.
- Long-term goals – Think about credit rebuilding, asset retention, and overall financial recovery.
How a Texas Bankruptcy Lawyer Can Help
Working with a Texas bankruptcy lawyer ensures you have an experienced advocate to analyze your finances, confirm eligibility, prepare filings, and represent you throughout the process.
An attorney helps avoid costly mistakes and ensures deadlines are met. Whether pursuing Chapter 7 or Chapter 13, a skilled bankruptcy attorney in Texas can explain the consequences, protect your rights, and guide you toward the option that best fits your financial recovery plan.
Read Also: Alternatives to Bankruptcy in Texas
Take Action Today to Regain Financial Control
Facing overwhelming debt is difficult, but you do not have to decide between Chapter 7 and Chapter 13 alone. With the right legal guidance, you can protect your assets, stop creditor actions, and take the first step toward a fresh financial start.
At the Law Office of Carrie L. Weir, we have decades of experience helping Texans choose the path that fits their needs and long-term goals.
Contact our office online or call 972-772-3083 to schedule your free initial consultation. We proudly serve clients in Rockwall, Kaufman, Dallas, Collin, and surrounding counties with trusted, compassionate bankruptcy counsel.
