The Chapter 13 Bankruptcy Process in Texas

Howard Tagg is an experienced Texas bankruptcy attorney serving clients in Smith County and surrounding communities

shutterstock_195940916Chapter 13 differs from Chapter 7 in that it involves a debtor filing a payment plan with a bankruptcy court. The amount the debtor will repay to creditors under the plan will vary based on a debtor’s particular circumstances.

The payments made to creditors under the plan must total at least as much as creditors would have received if the debtor filed a case under Chapter 7.  The payments are made to a trustee, who distributes the payments to the creditors. The plan lasts either until you pay your debts in full or until the end of a five year period. You receive a discharge at the completion of the plan.

In Chapter 13 debtors who possess income that is too high to qualify for Chapter 7 can protect non-exempt assets from the liquidation process. 

Debtors with substantial income and assets will often seek relief under Chapter 13 because they cannot qualify for Chapter 7 under the income “means test.”  The means test can be very complicated and a debtor should never make the decision between Chapter 7 and Chapter 13 without first consulting a bankruptcy attorney.

In order to qualify for Chapter 13, an individual must have a regular income that can cover the cost of the payment plan, either through employment, the operation of a business, or some other source.

A person may not file for Chapter 13 if:

  • He or she has filed for bankruptcy in the preceding 180 days; and
  • The bankruptcy case was dismissed by a court due to a willful failure on the part of the person to abide by the orders of that court; or
  • The person dismissed their bankruptcy after a creditor asked for relief from an automatic stay

A person will also be denied Chapter 13 protection if they possess unsecured debt that exceeds $360,475 in value, or secured that exceeds $1,081,400 in value. These numbers go up periodically.

The Law Office of Howard Tagg can provide you with further information about the Chapter 13 process, as well as legal guidance should you decide to file.  If you would like more information about bankruptcy, contact the Law Office of Howard Tagg today at (903) 581-9961 to schedule your free consultation or fill out the form below.