How to Qualify for Chapter 13 Bankruptcy in Texas

Qualifying for Chapter 13 bankruptcy in Texas can be a challenging process, but understanding the requirements can simplify it significantly. Chapter 13, often referred to as a wage earner’s plan, allows individuals with regular income to create a plan to repay all or part of their debts over three to five years. Below are the key factors to consider when determining eligibility.

1. Residency Requirements

To file for Chapter 13 bankruptcy in Texas, you must have been a resident of the state for at least 180 days prior to filing. This residency ensures that Texas laws and bankruptcy exemptions can be applied to your case.

2. Regular Income

Chapter 13 requires debtors to have a regular source of income, which can come from employment, self-employment, or other sources such as pensions or Social Security. This is crucial because you'll need to demonstrate your ability to make the required monthly payments throughout the repayment plan.

3. Debt Limits

As of 2023, to qualify for Chapter 13 bankruptcy, your secured debts (like mortgages and car loans) must be less than $1,257,850 and your unsecured debts (like credit cards and medical bills) must be under $419,275. If your debts exceed these amounts, you may need to consider Chapter 11 bankruptcy instead.

4. Credit Counseling

Before filing, you must complete a credit counseling course from a government-approved agency. This course is typically online and lasts about 60 to 90 minutes. After completion, you will receive a certificate that you must submit with your bankruptcy petition.

5. Tax Returns

When filing for Chapter 13 bankruptcy, it’s essential to provide your most recent tax returns. The court requires copies of these documents to assess your financial situation and determine your ability to make repayments.

6. No Recent Bankruptcy Discharges

You cannot qualify for Chapter 13 bankruptcy if you have received a discharge in a previous bankruptcy case within the last four years for Chapter 7, or two years for Chapter 13. You must be compliant with the terms of any prior bankruptcy plans.

7. Filing Fee

There is a filing fee associated with Chapter 13 bankruptcy in Texas, which is approximately $310. You may be eligible for a fee waiver if your income is below a certain level, or you may be allowed to pay in installments.

Conclusion

Understanding how to qualify for Chapter 13 bankruptcy in Texas is the first step towards regaining financial stability. Make sure to gather all necessary documentation, meet the eligibility criteria, and consult a qualified bankruptcy attorney to help guide you through the process. By doing so, you can create a manageable repayment plan and work towards a brighter financial future.