Chapter 7 vs Chapter 13 Bankruptcy in Texas
Chapter 7 is a liquidation bankruptcy that discharges most unsecured debt in roughly three to four months but requires passing the means test, while Chapter 13 is a reorganization that consolidates debt into a three- or five-year court-supervised repayment plan and can stop a foreclosure by curing arrears over time. For Texas filers the choice is heavily shaped by the state's exemptions: Texas Property Code § 41.002 protects an unlimited-value homestead on up to 10 acres in a city or 100 acres rural (200 for a family), so many Texas homeowners keep their house in either chapter.
Chapter 7 — liquidation
A trustee reviews your assets, sells any that are not exempt, and distributes proceeds to creditors. Most consumer filers in Texas have no non-exempt assets at all because of the state's exemption scheme.
Advantages
- Fastest route to discharge — commonly about three to four months from filing
- Discharges most unsecured debt, including credit cards, medical bills, and deficiency balances
- No repayment plan and no multi-year trustee supervision
- The automatic stay under 11 U.S.C. § 362 stops collection calls, garnishments, and lawsuits on filing
Trade-offs
- You must pass the means test or qualify by income below the Texas median
- Non-exempt property can be sold by the trustee
- Does not cure mortgage or car-loan arrears — it does not stop a foreclosure permanently
- Does not discharge most student loans, recent taxes, child support, or spousal maintenance
Best for: Filers with primarily unsecured debt, income at or below the Texas median for their household size, and assets that fit within the Texas or federal exemption set.
Chapter 13 — reorganization
You propose a plan to pay disposable income to a trustee for three or five years. Secured arrears are cured through the plan, and any qualifying unsecured balance remaining at the end is discharged.
Advantages
- Cures mortgage arrears over the life of the plan, which is the standard tool for stopping a Texas foreclosure
- Available even when income is too high to pass the means test
- Can strip wholly unsecured junior liens and, in some cases, reduce a vehicle loan to the collateral's value
- Protects non-exempt property, which is retained rather than liquidated
Trade-offs
- Three to five years of court-supervised payments
- Discharge only arrives after plan completion — a missed-payment default can dismiss the case
- Requires reliable, documented, ongoing income
- Debt limits apply under 11 U.S.C. § 109(e)
Best for: Filers who are behind on a mortgage or vehicle and want to keep it, who have non-exempt assets to protect, or who do not pass the Chapter 7 means test.
Side-by-side comparison
| Factor | Chapter 7 — liquidation | Chapter 13 — reorganization |
|---|---|---|
| Typical duration | About 3–4 months to discharge | 3-year or 5-year plan, then discharge |
| Income test | Means test under 11 U.S.C. § 707(b) | No means-test bar; requires regular income |
| Home in foreclosure | Delays the sale via the automatic stay but does not cure arrears | Cures arrears through the plan — the standard save-the-home option |
| Non-exempt property | May be sold by the trustee | Retained; unsecured creditors must receive at least liquidation value |
| Texas homestead | Protected under Tex. Prop. Code § 41.002 with no dollar cap on value | Protected, and arrears can be cured |
| Vehicle treatment | Reaffirm, redeem, or surrender | Paid through the plan; possible cramdown outside the 910-day window |
| Credit reporting | Generally reported up to 10 years | Generally reported up to 7 years |
How do Texas exemptions change the analysis?
Bankruptcy is federal law, but exemptions decide what you actually keep, and Texas filers may choose the Texas exemption set instead of the federal one. Texas Property Code § 41.001 and § 41.002 protect a homestead with no cap on value — up to 10 acres in a city, town, or village, and up to 100 acres rural for a single adult or 200 acres for a family. That is one of the most protective homestead exemptions in the country.
Texas Property Code § 42.001 and § 42.002 add a personal property exemption capped at an aggregate fair market value of $100,000 for a family or $50,000 for a single adult, covering categories including home furnishings, tools of the trade, a reasonable amount of livestock, two firearms, and one motor vehicle per licensed household member. Retirement accounts and most insurance benefits are protected separately.
- Homestead: unlimited value, acreage-limited (Tex. Prop. Code § 41.002)
- Personal property: $100,000 family / $50,000 single adult aggregate (Tex. Prop. Code § 42.001)
- Current wages for personal services are exempt from most garnishment in Texas
What is the means test, and who has to pass it?
The means test under 11 U.S.C. § 707(b) compares your household income for the six months before filing against the median income for a Texas household of the same size, as published by the U.S. Trustee Program and updated periodically. Filers below the median generally qualify for Chapter 7 without further analysis. Filers above it complete the second part, which deducts allowed expenses to determine whether meaningful disposable income exists.
Failing the means test does not end the case — it usually redirects it to Chapter 13.
Which chapter stops a foreclosure in Texas?
Both chapters trigger the automatic stay under 11 U.S.C. § 362, which halts a scheduled Texas foreclosure sale immediately. The difference is what happens next. Chapter 7 does not provide a mechanism to catch up missed payments, so unless the arrears are cured another way the lender can seek relief from the stay and re-post the property. Chapter 13 spreads the arrears across the plan while you resume regular payments, which is why it is the standard tool for keeping a home.
Texas foreclosures move quickly — non-judicial sales occur on the first Tuesday of the month after notice under Texas Property Code § 51.002 — so timing matters more here than in judicial-foreclosure states.
What neither chapter erases
Certain debts survive both chapters, including most student loans absent an undue-hardship showing, domestic support obligations, recent priority taxes, criminal restitution, and debts arising from fraud that a creditor successfully challenges. Knowing which of your debts are non-dischargeable before filing is what determines whether bankruptcy actually solves the problem.
Frequently asked questions
- Will I lose my house if I file bankruptcy in Texas?
- Usually not because of the filing itself. Texas Property Code § 41.002 exempts a homestead with no limit on value, subject to acreage limits of 10 urban acres or 100 rural acres for a single adult and 200 for a family. You still have to stay current on the mortgage — the exemption protects equity, not the lender's lien.
- How long does Chapter 7 take in Texas?
- A typical no-asset Chapter 7 runs roughly three to four months from the filing date to discharge, with the § 341 meeting of creditors held about a month after filing.
- Can I choose federal exemptions instead of Texas exemptions?
- Yes. Texas is an opt-out-optional state, so filers may elect either the Texas exemption scheme or the federal scheme in 11 U.S.C. § 522(d) — but not a mix. Homeowners with significant equity usually do better with the Texas set; renters sometimes do better with the federal wildcard.
- Does Chapter 13 stop a Texas foreclosure sale?
- Filing triggers the automatic stay, which stops a scheduled sale, and the Chapter 13 plan then cures the arrears over three to five years while regular payments resume. The case must be filed before the sale occurs.
- How often can I file?
- A Chapter 7 discharge is generally available eight years after a prior Chapter 7 filing date. Chapter 13 has shorter intervals — commonly four years after a Chapter 7 filing and two years after a prior Chapter 13 filing.
Texas authority cited on this page
This page is general information about Texas law, not legal advice, and reading it does not create an attorney-client relationship. Winfrey Law Firm, PLLC is licensed to practice in Texas. Every case turns on its own facts, and prior results do not guarantee a similar outcome.