How Do You Qualify for Chapter 13 in Texas?

A Chapter 13 bankruptcy can be a helpful strategy for someone to get their debt situation under control, manage payments, and begin the path to a solid financial foundation. However, not everyone can qualify for the Chapter 13 process. The requirements can be tough to understand if you aren’t familiar with them. There are some basics that you can assess yourself initially, but as you get deeper into the process, you'll want someone who knows their way through the process to help you along. You'll need to be aware of some of the requirements you need to meet to file for Chapter 13 before and throughout the process.

Chapter 13 Is Designed for Individuals

Chapter 13 bankruptcy is a process designed for individuals. It is not a plan meant to help businesses restore their financial situation. Therefore, anyone seeking a Chapter 13 bankruptcy must be filing as an individual. Married couples, though, may file jointly. The one case in which business debts may be involved with Chapter 13 is the case of a sole proprietor. In this circumstance, the personally guaranteed business debts of the proprietor may also be included in the repayment plan.

How do you qualify for Chapter 13 in Texas?

Have Enough Income to Make Monthly Payments

Since Chapter 13 bankruptcy is a repayment plan, you are going to need to prove you have enough income to cover your necessities, such as food, shelter, and healthcare, while having enough remaining to cover the debt repayments on the plan's schedule. Fortunately, you may use income from a variety of sources, including any type of work, whether employment, self-employment, or otherwise. You may also use payments from several programs like pension, Social Security, worker's compensation, etc. To get an understanding of what income sources apply to your individual circumstance, it's a good idea to work with someone experienced in managing Chapter 13 bankruptcies.

Have a Debt Profile Within the Accepted Limitations

For Chapter 13 bankruptcy, you need to have debts below certain thresholds. In any case filed between April 1, 2022, and March 31, 2025, unsecured debts need to be below $465,275, and the secured debts must not be more than $1,395,875. Getting a full picture of where your debts currently stand can be challenging, but a professional can help you sort through your records and help you get an idea of where you stand.

You Must Be Up-To-Date on Tax Filings

Lastly, to be able to file for Chapter 13 bankruptcy, you need to be current on your taxes for the four most recent filing years. In the stress and anguish of financial difficulty, it's easy for these things to fall behind. Many people already feel the crush of debt and put off doing taxes if they believe it will only make that burden larger. However, any state or federal tax filings must be submitted and accepted before the Chapter 13 process can proceed. This requirement is to your benefit, though, as it helps give you a clearer picture of where your debt currently stands. Only with that full understanding of the situation can Chapter 13 be used to help you get back into a good financial position.

Comply With All Parts of the Chapter 13 Bankruptcy Process

Chapter 13 is an ongoing process that lasts three to five years. The payment plan is the most notable part of the process, but there are other requirements. It's also possible to become disqualified at any point in that process. Disqualification could result in the debts remaining in your name even if they were to be discharged at the end of the term according to the repayment plan. Therefore, you are going to need to keep up with the mandated parts of the process, including filings, financial training, and the repayment plan. Only once every aspect of the process is completed will your debts be discharged.


Q: Can a Person Be Denied Chapter 13?

A: Yes, it is possible to have your Chapter 13 bankruptcy claim dismissed. It can be dismissed if you fail to make the claim as an individual, have insufficient income, have debts that exceed the legal limitations, or are not current on your taxes. Additionally, it may also be dismissed if you fail to complete any steps that are required to file a claim, miss payments, or commit bankruptcy fraud.

Q: What Income Is Used for Chapter 13?

A: To meet the income requirement, you may use income from a variety of sources, including:

  • Pay from work, whether full-time, part-time, seasonal, commission, or self-employed work
  • Payments from programs such as a pension, Social Security, disability or worker's compensation, unemployment, or similar
  • Child support or alimony
  • Rents
  • Income from selling property

Q: What Are the Exemptions for Chapter 13 in Texas?

A: You may choose to take the federal exemptions for bankruptcy or the Texas exemptions, depending on what is ideal for your case. Texas has a variety of exemptions, including:

  • Homestead exemption
  • Motor vehicle exemption
  • Personal property exemption (up to $50,000 for an individual and $100,000 for a family)
  • Retirement accounts and pensions
  • Insurance plans (life, health, accident, or annuity benefits, or fraternal benefit society benefits)
  • College savings plans
  • Crime victim awards
  • Medical assistance
  • Public officers killed in duty survivor's benefits
  • Unemployment benefits
  • Worker's compensation
  • Interest in specific partnership property

Q: What Is the Downside of Filing Chapter 13?

A: If you are in a situation where a Chapter 13 bankruptcy might be a possible solution, any plan to get back on stable financial footing will come at a cost. Chapter 13 does have some downsides, such as the impact on your credit score, the three to five-year repayment plan, and the elimination of disposable income for that period. However, those downsides may not be as consequential as other strategies for managing the debt. Someone knowledgeable in the issue may help you better understand what will be the most beneficial option for your situation.

An Experienced Attorney Can Help You Avoid Dismissal

If you think a Chapter 13 bankruptcy might be right for you but aren't sure if you fit the qualifications, then you want someone looking at your case who has dealt with these situations before. Additionally, if you feel confident that you qualify but aren't sure of the next steps, then someone with experience with the process can help you understand what comes next. In either situation, Steele Law Firm can help. Contact us and let us put our experience to work for you.

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