What Is Chapter 13 Bankruptcy in Texas: Plan, Property, Discharge

Chapter 13 bankruptcy in Texas is a court-supervised repayment plan that lets individuals with regular income pay off some or all of their debts over three to five years while keeping their property, including a home protected by the state’s generous homestead exemption. You make one monthly payment to a court-appointed trustee, who distributes the money to creditors under a plan a bankruptcy judge has approved. When you finish, the balance of most remaining unsecured debt is wiped out.

That is the shape of it. The rest is who qualifies, how the plan is built, what it protects, and what happens if things go wrong.

Who Can File Chapter 13 in Texas

Chapter 13 is for individuals only. Corporations, partnerships, and LLCs cannot file. If you run a business as a sole proprietor or you’re self-employed, you still file in your own name as an individual.¹

You need “regular income,” and that is read broadly. A paycheck counts. So do Social Security, pension payments, self-employment income, and consistent contributions from a spouse or partner. The question the court cares about is whether your income is predictable enough to fund a plan.

There are also hard ceilings on how much you can owe. As of April 1, 2025, your noncontingent, liquidated unsecured debts must be below $526,700, and your noncontingent, liquidated secured debts must be below $1,580,125. Those limits run through March 31, 2028.² “Noncontingent” means the debt doesn’t depend on a future event, and “liquidated” means the amount is fixed or easily calculated. Owe more than that in either category, and Chapter 13 isn’t available; Chapter 11 is the alternative, and it’s more complex and expensive.

One prerequisite catches people off guard: before you file, you have to finish a credit counseling course from a provider approved by the U.S. Trustee Program. The course must be completed within 180 days before your filing date, and the certificate goes in with your petition.³

How the Repayment Plan Works

Every Chapter 13 plan runs either three years or five years, and your household income decides which. If your current monthly income is below the Texas median for your household size, the minimum is three years, though a court can approve longer for cause. If your income is above the median, the plan generally runs five.¹

The current Texas median income figures used in the means test are:

1 earner: $63,448
2-person household: $83,037
3-person household: $95,391
4-person household: $110,719
Each additional person: add $11,100

These numbers are updated periodically by the U.S. Trustee Program using Census Bureau data.⁴

Your monthly plan payment is built from your “projected disposable income,” which is what’s left after allowable living expenses. You send one payment to your Chapter 13 trustee each month, and the trustee splits that money among creditors according to the confirmed plan. The trustee keeps a percentage as a commission for running the case.

How Different Debts Are Treated

Debts don’t come out of the plan in equal shares. The Bankruptcy Code sets an order.

Priority debts must be paid in full through the plan. These include domestic support obligations such as child support and alimony, and certain tax debts owed to government agencies. Domestic support has first priority over every other claim.⁵⁶

Secured debts, meaning anything tied to collateral like a mortgage or car loan, get addressed next. For most secured debts, the plan can restructure the terms and let you cure missed payments over time. There’s a key exception: the plan cannot modify the terms of a mortgage on your primary residence, though it can cure a default and bring you current.⁵ That cure feature is why many Texans in foreclosure file Chapter 13 in the first place.

Unsecured debts, like credit cards, medical bills, and personal loans, are last in line. They get whatever disposable income is left after priority and secured debts are handled, and that often works out to a fraction of what’s owed. There is a floor though. Under the “best interest of creditors” test, your plan must pay unsecured creditors at least as much as they would have received if you had filed Chapter 7 and your non-exempt assets had been sold off.⁷ Because Texas exemptions are so generous, that floor is often quite low.

What Property You Get to Keep

Keeping property is the main reason most people choose Chapter 13 over Chapter 7. Instead of surrendering assets to be sold, you pay creditors out of future income. Texas exemptions are among the most protective in the country, and they shape both what you keep and how little your plan has to pay unsecured creditors.

The Texas Homestead

Texas does not cap the dollar value of the homestead exemption for most filers. If your property meets the acreage limits, the full value of your home is protected regardless of how much equity you’ve built:

Urban property: up to 10 acres, which can span multiple contiguous lots
Rural property, family: up to 200 acres
Rural property, single adult: up to 100 acres

Those limits include improvements on the land.⁸ The homestead is exempt from seizure by creditors, with limited exceptions for purchase-money loans, property taxes, and certain home-equity lending.⁹

A federal rule overrides the Texas no-cap generosity in one situation. If you acquired your homestead within 1,215 days (about three years and four months) before filing, the exemption is capped at $214,000 in equity no matter what Texas law allows. The cap is adjusted periodically for inflation, and it exists to stop people from buying an expensive home right before bankruptcy to park wealth.

Personal Property

Beyond the homestead, Texas protects personal property up to an aggregate fair market value of $50,000 for a single adult or $100,000 for a family. That umbrella covers vehicles, household furnishings, tools of your trade, and other items listed in the statute.¹⁰ Retirement accounts, including IRAs and 401(k)s, are generally exempt without a dollar cap under both federal and Texas law.

The Automatic Stay Stops Collection Immediately

The moment you file, an automatic stay takes effect. It’s a court order that stops most collection activity against you, including lawsuits, wage garnishments, foreclosure sales, and repossessions. For many filers staring down a foreclosure date or a frozen bank account, that stay is the most immediate reason to file.

The stay doesn’t stop everything. Several categories of action continue:

Criminal prosecutions.
Collection of domestic support, including continued wage withholding for child support or alimony.
Many family law matters, including divorce, custody, and domestic violence cases, though division of property that’s part of the bankruptcy estate is stayed.
Tax audits, deficiency notices, and assessments by the IRS or state tax agencies.

Those exceptions come straight from the Bankruptcy Code.¹¹

Repeat filers get less protection. If you had a bankruptcy case dismissed in the past year, the stay in your new case expires after 30 days unless you file a motion and convince the court the new case was filed in good faith within that window. If you had two or more cases dismissed in the preceding year, the stay doesn’t take effect at all without a court order.¹¹

The 341 Meeting and Plan Confirmation

After you file, the court schedules a meeting of creditors, called the 341 meeting after the Bankruptcy Code section that requires it. In Chapter 13 the meeting takes place between 21 and 50 days after filing.¹²

It is less dramatic than the name suggests. You appear before the Chapter 13 trustee, answer questions under oath about your finances and your proposed plan, and verify the information in your schedules. Creditors are allowed to attend, but most don’t. The trustee is mainly checking that your plan is feasible and that the numbers work.

A confirmation hearing then takes place before a bankruptcy judge. The judge checks that the plan was proposed in good faith, commits all of your projected disposable income for the applicable period, pays priority debts in full, and gives unsecured creditors at least what they would get in a Chapter 7 liquidation.⁷ You also have to be current on any post-filing domestic support obligations and have all required tax returns on file. Once the court confirms the plan, you start paying the trustee under its terms.

Changing the Plan if Life Changes

Three to five years is a long time, and plans built in the first month rarely survive untouched. If your situation changes, you, the trustee, or an unsecured creditor can ask the court to modify the plan. Typical changes include raising or lowering payments, extending the payment period, or adjusting what a specific creditor receives.¹³

A modified plan can’t push the total term past five years from when the first payment under the original plan was due, unless the court finds cause. The same legal requirements that applied to the original plan apply to the modification. A pay cut, a lost job, or an unexpected medical bill is a reason to modify, and it’s the first thing to try before a case slides into dismissal.

Finishing the Plan and Getting a Discharge

Completing every payment earns you a discharge, which wipes out your personal liability on the debts covered by the plan. Before the court will grant it, you have to certify that you’re current on all domestic support obligations and complete a debtor education course. That course is separate from the pre-filing credit counseling and must be taken after you file.³

What the Discharge Doesn’t Erase

Some debts survive even a successful Chapter 13:

Long-term debts paid through the plan. If your plan cured a mortgage default and kept up ongoing payments, the remaining mortgage balance continues after discharge on its original terms.
Domestic support obligations. Child support and alimony are untouched.
Recent income tax debts and taxes you were responsible for collecting or withholding.
Criminal fines and restitution ordered as part of a sentence.
Civil judgments for willful or malicious injury or death.
Student loans, unless you can prove undue hardship in a separate proceeding, which is a notoriously difficult standard to meet.

The complete list sits in the Bankruptcy Code.¹⁴ Chapter 13 does discharge a few debts that Chapter 7 does not, including certain property settlement obligations from divorce and some debts from willful property damage. That broader discharge is why some filers who qualify for Chapter 7 still choose Chapter 13.

If You Can’t Finish the Plan

Roughly a third of Chapter 13 cases don’t make it to discharge. If payments become impossible, there are a few off-ramps.

Modification, as described above, is the first thing to try. Courts prefer adjusting a plan to tearing it up.

Conversion to Chapter 7 is next. If your finances have fallen too far for any modified Chapter 13 to work, you can convert the case to a Chapter 7 liquidation. The rules change: non-exempt assets become available to pay creditors, but you get a discharge much faster. The cost is that you may lose property Chapter 13 was protecting.

Dismissal ends the case. The automatic stay lifts, creditors can resume collection, and your debts remain. Payments you made through the plan are credited to the debts, so you aren’t starting from zero, but the structural protection is gone. A dismissal also triggers the repeat-filer limits on the automatic stay if you file again within a year.

A hardship discharge is the rare escape hatch. In unusual cases the court can grant a discharge even though you didn’t finish paying. You have to show three things: the failure to complete payments was caused by circumstances beyond your control, unsecured creditors have already received at least what they would have gotten in a Chapter 7, and further plan modification isn’t feasible.¹⁴ Courts apply that standard strictly. A job loss followed by a real search for new work might qualify; choosing to work fewer hours won’t. A hardship discharge also covers fewer debts than a standard Chapter 13 discharge, leaving more obligations in place.

What It Does to Your Credit

A Chapter 13 bankruptcy can stay on your credit report for up to 10 years from the filing date.¹⁵ In practice, the major credit bureaus often remove a completed Chapter 13 after seven years, but they aren’t required to. The initial hit is significant. Many filers see their scores start recovering within a year or two of consistent plan payments, because steady payments replace a pattern of missed payments and collections.

The filing is also a public record through the federal court’s electronic filing system. Lenders, landlords, and employers who run background checks may still see it even after it drops off your credit report.

1
United States Courts. Chapter 13 Bankruptcy Basics
2
Office of the Law Revision Counsel. 11 U.S. Code 109 – Who May Be a Debtor
3
United States Courts. Credit Counseling and Debtor Education Courses
4
U.S. Trustee Program. Census Bureau Median Family Income By Family Size
5
Office of the Law Revision Counsel. 11 U.S. Code 1322 – Contents of Plan
6
Office of the Law Revision Counsel. 11 U.S. Code 507 – Priorities
7
Office of the Law Revision Counsel. 11 U.S. Code 1325 – Confirmation of Plan
8
State of Texas. Texas Property Code Section 41-002 – Definition of Homestead
9
State of Texas. Texas Property Code PROP 41-001 – Interests in Land Exempt From Seizure
10
State of Texas. Texas Property Code PROP 42-001 – Personal Property Exemption
11
Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay
12
Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 2003 – Meeting of Creditors or Equity Security Holders
13
Office of the Law Revision Counsel. 11 U.S. Code 1329 – Modification of Plan After Confirmation
14
Office of the Law Revision Counsel. 11 U.S. Code 1328 – Discharge
15
Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports?