Chapter 7 Bankruptcy Texas: 3 Things You Need to Know

You may have experienced a financial hardship and are considering filing bankruptcy in Texas, specifically Chapter 7 bankruptcy. 

There are 3 important things to consider when pursuing Chapter 7 bankruptcy in Texas:

1. Do you qualify for a Chapter 7 bankruptcy and how much does it cost to file bankruptcy in Texas?
2. What are the alternatives to Chapter 7 bankruptcy?
3. What is specific need-to-know Chapter 7 bankruptcy information for Texas?

Chapter 7 bankruptcy is the most common bankruptcy in the United States (Source).

Let’s get started to understand why Chapter 7 is a popular choice in Texas.

1) How Chapter 7 Bankruptcy Works in Texas

Many people we speak with care about two things:

1. How fast they can get relief from their debt burden.
2. How much is costs to get out of their debt burden?

When comparing debt-relief options, Chapter 7 bankruptcy often wins in both categories over alternatives such a Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning. Let’s explore those variables in greater detail.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy in Texas

You can often get a Chapter 7 bankruptcy discharge in as little as 120 days in Texas. That is the typical time it takes to complete a no-asset Chapter 7 case in Texas. No-asset generally means that you do not own a home or other assets that may be above the Texas bankruptcy exemptions.  

How Much Does It Cost To File Chapter 7 bankruptcy in Texas

The Chapter 7 bankruptcy cost nationwide tends to be between $500 and $3000. That said, Chapter 7 bankruptcy cost in Texas is different. 

The Chapter 7 bankruptcy cost may even be different if you are filing in Dallas vs. San Antonio. For example, you may pay a Chapter 7 bankruptcy attorney fee of $1,800 in Dallas, but pay a bankruptcy attorney fee of $1,500 in Houston.

Also, there are instances where the cost to file bankruptcy can be reduced based on a filing fee waiver. You should consider seeing the information related to Texas filing fee waiver.

So, How Do I Qualify For Chapter 7 Bankruptcy in Texas?

Chapter 7 bankruptcies are intended for people who cannot afford to pay any portion of their debts. However, you must first pass an income evaluation to qualify for a bankruptcy discharge (forgiveness of debt) in Chapter 7.

If you pass the Texas bankruptcy means test (which you can estimate below), you can erase most unsecured debts through Chapter 7. Unsecured debts discharged in Chapter 7 include medical bills, personal loans, some old income tax debt, old utility bills, credit card debts, and most personal judgments. Unsecured creditors hold debts that are not secured by collateral. 

What about secured debts in Chapter 7?

If, however, you want to get rid of secured debts, like car loans and mortgages in Chapter 7, you need to surrender the asset to the creditor. The creditor must accept the asset as full payment of the amount owed. 

Let’s go into how you qualify for Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via Texas Means Test

An important element in filing for bankruptcy relief is the means test. The means test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in Texas.

If your average annual income or median income is below the Texas median income, you may qualify for a bankruptcy discharge under Chapter 7. You can estimate whether you qualify for a Chapter 7 bankruptcy using the free Texas Chapter 7 Bankruptcy Means Test Calculator below. 

Help! My Income Exceeded The Chapter 7 Means Test Allowable in Texas

If your median income is above the state median income, you may need to look at part 2 of the means test or at an alternative. 

The Means Test is a two-part test, so it is not a simple pass-fail test. If you “fail” the first section, you can “pass” the second section and still qualify under Chapter 7.  

You can learn more about passing the Chapter 7 means test when income exceeds the median.

Chapter 7 Bankruptcy Texas Income Limits

The Texas median income figures for the Means Test are adjusted periodically, based on IRS and Census Bureau data. Texas median income for bankruptcy cases filed on or after April 1, 2024 is:

For Texas households with more than 9 members, add $9,000 for each additional family member. You should always double-check the US Trustees website for the most current figures when calculating the Means Test.

Will I lose my belongings if I file Chapter 7 bankruptcy? Understand Texas bankruptcy exemptions

Bankruptcy exemptions protect the equity in your property in a bankruptcy case. Likewise, property not protected by bankruptcy exemptions may be sold in a Chapter 7 liquidation case. Note also that for Chapter 13 cases, non-exempt equity in the property can increase the bankruptcy plan payment. 

The most important asset most people like to protect is their home. See the Texas bankruptcy homestead exemption below.

The homestead exemption is often broken down by age and whether you are married. 

• Single and under 65: Infinite
• Single is 65 or older: Infinite
• Married and under 65: Infinite
• Married is 65 or older: Infinite

Texas specific homestead bankruptcy exemption text: “Tex. Const. Art. XVI, §§ 50, 51; Tex. Prop. Code §§ 41.001 to 002. Unlimited for 100 acres rural (single) / 200 acres rural (family), 1 acre urban. sale proceeds exempt for 6 months after sale (renting okay if another home not acquired, Prop. 41.003). Must file homestead declaration, or court will file it for you for a fee. Due to Enron executives keeping multi-million dollar mansions, those convicted of securities violations are capped at $125,000.” (Source)

It is important to review additional Texas bankruptcy exemptions and choose those exemptions that best protect your assets.

The federal bankruptcy exemptions are detailed in 11 U.S. Code §522. The National Consumer Law Center maintains a list of federal bankruptcy exemptions on its website. Texas is a state that allows you to use federal bankruptcy exemptions

Always check that you use the most current information available when analyzing bankruptcy exemptions. 

Chapter 7 Bankruptcy Texas Pros and Cons

Pros

1. Often the least expensive debt relief options
2. Receive discharge in about 120 days
3. Potentially keep your home and belongings
4. Stop debt collection lawsuits
5. No more deficiency
6. It can relieve an unaffordable unsecured debt

Cons

1. Income requirements for qualification
2. Potentially lose your home and other belongings when above the exemption
3. Negative credit report impact for 10 years
4. Negative credit score impact (in some situations)
5. Non-dischargeable debt
6. Difficult to prevent foreclosure

2) Alternatives to Chapter 7 Bankruptcy in Texas

Let’s cover the Chapter 7 bankruptcy alternatives in Texas in case you do not qualify for Chapter 7 bankruptcy, have too many assets, or do not wish to pursue Chapter 7 bankruptcy.

a) Chapter 13 Bankruptcy in Texas

For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in Texas case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles under Chapter 13.

Chapter 13 stops foreclosures in Texas, repossessions, and potentially stops Texas wage garnishments. Chapter 13 bankruptcy also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, Texas may also allow you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.

In a Chapter 13 plan, some debtors (the person filing the bankruptcy case) can lower their car loan payments and erase second mortgages, if they meet certain requirements. 

Can you afford Chapter 13 bankruptcy?

Let’s say you do not qualify for a Texas Chapter 7 bankruptcy and are wondering whether you should pursue a Chapter 13 bankruptcy. Can you afford it? It may be odd to ask whether you can afford bankruptcy, but it’s an important question to ask.

To understand whether you can potentially afford a Chapter 13 bankruptcy, you may want to take the Chapter 13 calculator below to estimate whether you can afford the monthly payment. 

b) Debt Relief

TX debt relief can be less expensive than both Debt Management and Debt Payoff Planning because the debt management company is negotiating a lower amount on your total debt. We covered the pricing estimate differences in our article covering debt management vs debt settlement.

You should consider the following if you are pursuing debt settlement: Credit score impact, debt settlement pros and cons, and avoiding Debt Settlement companies with red flags.

c) Texas Debt Management

Debt settlement companies negotiate lower amounts. Debt management companies negotiate lower interest rates. This is the key distinction. Often these programs last 3 or 5 years. This option is often more expensive than debt settlement and some creditors such as personal loan lenders may not work with the debt management company. There may be debt management credit score implications as well.

Who may debt management in Texas best for? Debt management may be best for those that have all high-interest credit card debt, and a reduction from 22-30% interest rate to a 10% interest rate would continue to make the debt affordable.

d) Texas Debt Payoff Planning

You may be able to get out of debt through debt payoff planning, which is often a combination of trying to reduce expenses and putting extra cash into specific debts to avoid interest. You may not be able to do this because of the size of the financial hardship, but if you are interested, we build the Savvy debt payoff planner to help prioritize your debts. The app saves about $2,000 in interest on average by using the savvy debt payoff method instead of the snowball debt payoff method.

3) Specific Texas Chapter 7 Bankruptcy Information:

Let’s say you went through the 2 steps above and are now considering whether Chapter 7 bankruptcy is the right choice for you. Let’s go through some attributes about filing Chapter 7 bankruptcy in Texas that would be helpful to consider.

Texas Chapter 7 Bankruptcy Credit Counseling and Debtor Education Courses

When you file for bankruptcy relief under Chapter 7 bankruptcy, you must complete two bankruptcy courses to receive a bankruptcy discharge. This includes a credit counseling course prior to filing a bankruptcy case, and a debtor education course after filing. See below the approved courses for Texas

• Credit Counseling Approved Courses
• Debtor Education Approved Courses

The United States Trustee’s office has approved state-specific companies that offer bankruptcy courses. You can access a list of companies in Texas offering bankruptcy courses on the US Trustee's website. Both courses are available online for a small fee.

Texas Chapter 7 bankruptcy Court Locations

Many 341 meetings of creditors have been over the phone or over Zoom due to the pandemic. That said, you may want to see where the courthouse is in Texas if there are any meetings that need to take place in person. Below are the court locations for filing bankruptcy based on the bankruptcy district.

Northern District

• 341 Pine Street, Room 2008
  Abilene, TX 79601
• 205 SE 5th Avenue, Room 133
  Amarillo, TX 79101-1559
• 1100 Commerce Street, Room 1452
  Dallas, TX 75242
• 501 West 10th Street, Room 310
  Fort Worth, TX 76102-3673
• 1205 Texas Avenue, Room 209
  Lubbock, TX 79401-4091
• 33 E. Twohig Avenue, Room 202
  San Angelo, TX 76903-6451
• 1000 Lamar Street, Room 203
  Wichita Falls, TX 76301

Southern

• 600 E. Harrison St.
  Brownsville, TX 78520
• 1133 N. Shoreline Blvd.
  Corpus Christi, TX 78401
• 601 Rosenberg
  Galveston, TX 77550
• 515 Rusk Street
  Houston, TX 77002
• 1300 Victoria St.
  Laredo, TX 78040
• 1701 W. Business Hwy 83
  McAllen, TX 78501
• 312 S. Main, Room 406
  Victoria, TX 77901

Eastern

• 300 Willow Street Suite 104
  Beaumont, Texas 77701
• 104 North Third Street
  Lufkin, Texas 75901
• 100 East Houston Street Room 125
  Marshall, Texas 75670
• 500 North State Line Avenue
  Texarkana, Texas 75501
• 211 West Ferguson Street Room 106
  Tyler, Texas 75702

Western

• 2450 State Hwy. 118
  Alpine, Texas 79830
• 501 West Fifth Street, Suite 1100
  Austin, Texas 78701
• 111 East Broadway, Room L100
  Del Rio, Texas 78840
• 525 Magoffin Avenue, Suite 105
  El Paso, Texas 79901
• MG Williams Justice Center
  Bldg. 5794, Tank Destroyer Blvd.
• 200 East Wall, Room 222
  Midland, Texas 79701
• 410 South Cedar
  Pecos, Texas 79772
• 655 E. Cesar E. Chavez Blvd., Room G65
  San Antonio, Texas 78206

Chapter 7 Bankruptcy Trustees Texas

Below are the Chapter 7 bankruptcy trustees in Texas broken out by bankruptcy district. You can also find the list here. 

In addition to the above, review Texas local bankruptcy rules before filing a bankruptcy case. Some local rules may differ slightly from the Federal Bankruptcy Rules.

Conclusion

Hopefully, now you know much more about Chapter 7 bankruptcy in Texas. You can take the Chapter 7 bankruptcy means test calculator below if you’re interested to estimate qualification and cos

For more information about Chapter 7 bankruptcy, check out our Chapter 7 bankruptcy process. 

Most people work with a bankruptcy attorney in both Chapter 7 and Chapter 13, but there is the option to file without a bankruptcy attorney. Read filing bankruptcy without an attorney to learn how.