The Complete Process of Filing for Bankruptcy in Texas A Guide to Starting Fresh

Considering Bankruptcy in Texas? Let’s Talk Through It

If you’re feeling buried under a mountain of debt, constantly dodging calls from creditors, or losing sleep over unpaid bills, you’re not alone—and bankruptcy could be a solution worth considering. Filing for bankruptcy might sound intimidating or like a last resort, but it’s actually a legal tool designed to help people get back on their feet financially. In Texas, the bankruptcy process can be straightforward when you know what to expect and have the right guidance.

In this comprehensive guide, we’ll walk you through everything you need to know about filing for bankruptcy in Texas—from understanding different types of bankruptcy to navigating each step of the process. By the end, you’ll have a clearer picture of whether bankruptcy is the right path for you and how to make it as smooth as possible. So, grab your favorite drink, get comfortable, and let’s dive in!

What Is Bankruptcy?

At its core, bankruptcy is a legal process that provides relief from debt by eliminating or reorganizing it. In Texas, as in the rest of the United States, bankruptcy falls under federal law, so the process is largely the same across states, though Texas does have unique exemptions and rules.

Bankruptcy is generally divided into two main types for individuals: Chapter 7 and Chapter 13.

• Chapter 7 Bankruptcy: Known as “liquidation bankruptcy,” this type wipes out most unsecured debts like credit card balances, medical bills, and personal loans. It may require selling some non-exempt assets to pay creditors.
• Chapter 13 Bankruptcy: Also called “reorganization bankruptcy,” this option allows you to keep your assets while creating a structured repayment plan over three to five years.

The goal of bankruptcy? To give you a fresh financial start and a path to rebuild.

Step 1: Decide Which Bankruptcy Chapter to File

Choosing between Chapter 7 and Chapter 13 bankruptcy is crucial and depends on your specific situation. Let’s take a closer look at both options.

Chapter 7 Bankruptcy

Chapter 7 is ideal for individuals with low income who struggle with overwhelming debt and don’t have significant assets they need to protect. Under Chapter 7, most unsecured debts are discharged, meaning you won’t have to repay them. However, you may need to part with non-exempt assets, like a second home or high-value collectibles, to pay creditors.

• Pros: Quick debt relief, typically completed in a few months, no repayment plan.
• Cons: You may lose non-exempt property; doesn’t cover secured debts like mortgages.

Chapter 13 Bankruptcy

If you have a steady income and want to keep your assets, Chapter 13 might be a better fit. Through Chapter 13, you’ll create a court-approved repayment plan to pay off your debt over three to five years. After you’ve completed your payments, any remaining eligible debt may be discharged.

• Pros: Allows you to keep property and catch up on secured debts (like mortgage payments).
• Cons: Requires a long-term repayment commitment; not suitable for individuals with no income.

Pro Tip: Not sure which chapter is right for you? Consider consulting a bankruptcy attorney who can evaluate your financial situation and guide you toward the best choice.

Step 2: Check Eligibility Requirements

Bankruptcy eligibility requirements vary by chapter. To qualify for Chapter 7, you’ll need to pass the “means test,” which compares your income to the Texas median income. If you earn below the state median, you’re eligible for Chapter 7. If your income is higher, you may still qualify based on allowable expenses, like housing and medical costs.

For Chapter 13, you must have a stable income to make monthly payments under the repayment plan, and your unsecured debts must not exceed $465,275, while secured debts cannot exceed $1,395,875.

To check current income limits, visit the U.S. Trustee Program’s Means Testing page.

Step 3: Complete a Credit Counseling Course

Before you can officially file for bankruptcy, you’re required to complete a credit counseling course from an approved provider. This course is designed to provide insight into financial management and help you assess whether bankruptcy is the right option.

• Cost: Typically $25 to $50, but waivers may be available based on income.
• Time Commitment: Usually one to two hours, completed online or by phone.

Upon completion, you’ll receive a certificate that you must file with the court as part of your bankruptcy paperwork.

Step 4: File Your Bankruptcy Petition and Paperwork

The paperwork stage is where things get real. When filing for bankruptcy, you’ll submit a bankruptcy petition along with a mountain of forms detailing your income, expenses, debts, assets, and financial history. This information allows the court to assess your financial situation accurately.

If you’re working with a bankruptcy attorney, they’ll handle this part for you. If not, be meticulous about filling out every form accurately to avoid delays or issues.

Visit the U.S. Courts website for official bankruptcy forms and instructions.

Step 5: Automatic Stay—Protect Yourself from Creditors

As soon as you file your petition, an automatic stay goes into effect. This court order halts all collection activities, meaning creditors can’t contact you, garnish your wages, or foreclose on your home. The automatic stay offers immediate relief, allowing you to breathe a little easier while your bankruptcy case proceeds.

Step 6: Attend the 341 Meeting of Creditors

Roughly a month after you file, you’ll attend a 341 Meeting of Creditors, where you, your bankruptcy trustee, and any creditors can discuss your case. Don’t worry—this meeting is usually brief and straightforward. The trustee will ask questions about your finances to confirm the accuracy of your paperwork. Creditors may also ask questions, though they rarely attend.

• Important Note: Bring your ID and financial documentation to the meeting to avoid delays.

Step 7: Complete a Debtor Education Course

Before your debts can be discharged, you’ll need to complete a debtor education course. This course focuses on budgeting, money management, and financial planning to help you avoid debt issues in the future.

• Cost: Typically $50 to $75, with waivers available for low-income individuals.
• Completion Time: About one to two hours.

You’ll file your course completion certificate with the court to receive your discharge.

Step 8: Debt Discharge or Repayment Plan Confirmation

For Chapter 7 filers, the debt discharge usually occurs a few months after the creditors’ meeting. This discharge erases most unsecured debts, like credit card balances and medical bills. For Chapter 13 filers, the discharge occurs after you’ve completed your repayment plan, which could be three to five years down the road.

• Chapter 7: Quick discharge of eligible debts, typically within 4-6 months.
• Chapter 13: Discharge follows the successful completion of the repayment plan.

Once your discharge is approved, you’ll officially be free of the qualifying debts listed in your bankruptcy petition!

Life After Bankruptcy: Rebuilding and Moving Forward

Bankruptcy isn’t the end—it’s a new beginning. Once you’ve received your discharge, there are steps you can take to rebuild your financial life and credit score.

Create a Budget

To avoid falling back into debt, create a realistic budget that covers your monthly expenses, emergency fund, and savings goals. Budgeting apps like Mint and YNAB can help you track spending and stay organized.

Rebuild Your Credit

Filing for bankruptcy will impact your credit score, but you can start rebuilding immediately. Consider a secured credit card, pay bills on time, and keep credit utilization low.

Explore Financial Counseling

To maintain financial health, consider ongoing financial counseling. Many organizations offer free or low-cost advice on budgeting, credit management, and debt reduction.

For tips on improving your credit after bankruptcy, check out Experian’s guide to credit recovery.

Common Questions About Bankruptcy in Texas

Can I Keep My House and Car?

Texas has generous bankruptcy exemptions, allowing you to protect essential assets like your home and car. The Texas Homestead Exemption protects your primary residence, while personal property exemptions cover cars, furniture, and even certain retirement accounts.

How Long Will Bankruptcy Stay on My Credit Report?

Chapter 7 bankruptcy stays on your credit report for ten years, while Chapter 13 remains for seven years. The impact decreases over time, especially as you rebuild credit and demonstrate responsible financial habits.

Can I File Without an Attorney?

While it’s possible to file for bankruptcy on your own, working with an attorney is highly recommended. Bankruptcy law is complex, and an attorney can help you maximize exemptions, ensure accurate paperwork, and avoid costly mistakes.

Final Thoughts: Is Filing for Bankruptcy Right for You?

Deciding to file for bankruptcy is a personal choice influenced by your financial goals, situation, and long-term plans. If you’re struggling with overwhelming debt and need a fresh start, bankruptcy can provide relief and a pathway to rebuild. Remember, the goal of bankruptcy is to help you regain financial stability, not punish you for financial hardship.

Before filing, consider consulting a Texas bankruptcy attorney who can assess your situation, recommend the best course of action, and guide you through each step of the process.

If you’re ready to explore your options or have questions about filing for bankruptcy in Texas, visit Kisch Consumer Law to connect with experienced attorneys who can provide the guidance and support you need. You don’t have to navigate this process alone—reach out today, and take the first step toward financial freedom and peace of mind.