Reasons to file bankruptcy in Texas often come down to getting real debt relief fast. But the right path depends on your income, assets, and what types of debts you have. Some debts can be wiped out. Others will still have to be paid.
Key Takeaways
- Filing triggers the automatic stay, which can stop lawsuits and collection efforts.
- Chapter 7 can wipe out many unsecured debts, including credit cards and medical bills.
- The stay may pause foreclosure or repossession, but secured loans still exist.
- Texas exemptions can protect homestead, vehicles, and retirement accounts when rules are met.
- Most Texas Chapter 7 cases are “no-asset,” so many filers keep what they own.
Warren & Migliaccio, L.L.P. has helped North Texas families and individuals pursue a fresh financial start since 2006. Our attorneys are Lead Counsel Verified, and we serve Dallas, Collin, Denton, and Tarrant counties.
What Chapter 7 Bankruptcy Does in Texas
Chapter 7 bankruptcy is a personal bankruptcy option that can wipe out many unsecured debts under federal law in federal courts. It is built to discharge qualifying debt and reset your financial future.
Chapter 7 is often called “liquidation bankruptcy” because a bankruptcy trustee can sell non-exempt assets to repay creditors. Most people who file do not “lose everything” because exemption laws protect exempt property.
Chapter 7 commonly addresses:
- Unsecured debts like credit card debt and many medical bills
- Collection lawsuits, collection calls, and many other collection actions through the automatic stay¹
- A fast timeline in many cases, with discharge often happening about four months after the bankruptcy petition is filed³
Chapter 7 usually does not eliminate:
- Child support and many other family support obligations³
- Many student loans (most require a separate court process)³
- Some tax debts, depending on the facts³
This is the part where most clients panic. But the first step is simply getting clear on what you own, what you owe, and what you earn.
Chapter 7 vs. Chapter 13 in Texas
| Comparison Point | Chapter 7 | Chapter 13 |
|---|---|---|
| Core relief described | Quick discharge of qualifying unsecured debt. | Court-approved repayment plan with monthly payments overseen by a trustee. |
| Typical timeframe described | Discharge about four months after filing if deadlines are met. | A 3 to 5-year court-approved repayment plan. |
| Best-fit use case described | Often fits when dealing mainly with unsecured debt and passing the means test. | Often fits when you have regular income and need a structured way to catch up. |
| Process snapshot stated | Trustee review, one 341 meeting, then discharge in months. | Plan payments for years, with the trustee supervising distribution. |
| Automatic stay | Triggers the automatic stay under 11 U.S.C. § 362. | Triggers the automatic stay under 11 U.S.C. § 362. |
| Debts that often survive (as stated) | Some debts often survive, including child support and many student loans; some tax debts depend on the facts. | Some debts often survive, including child support and many student loans; some tax debts depend on the facts. |
Key Facts: Chapter 7 Timeline and Requirements in Texas
Chapter 7 has set legal steps, even though each case has its own timing. Knowing the timeline helps you plan for the bankruptcy court process and the trustee review.
| Step | Typical Timing | Why It Matters |
|---|---|---|
| Credit counseling | Within 180 days before filing | Required before a bankruptcy petition can be filed |
| File petition with the bankruptcy court | Day 0 | Starts the case and triggers the automatic stay |
| Trustee appointment | Soon after filing | Trustee reviews assets, debts, and exemptions |
| 341 meeting of creditors | Often about a month after filing | Required meeting with the trustee (usually not in front of a judge) |
| Debtor education course | After filing, before discharge | Missing it can delay or block discharge |
| Discharge in a Chapter 7 case | Often about four months after filing | Court order that wipes out many unsecured debts |
RELATED: Chapter 7 Bankruptcy Attorney in Dallas | Serving North Texas
7 Reasons to File Bankruptcy in Texas
Texans file Chapter 7 bankruptcy to stop financial bleeding and get structured relief through bankruptcy court. If the stress is constant and the numbers never work, Chapter 7 can be the reset button.
What We Consistently See in North Texas Chapter 7 Cases
What We See: In Dallas, Collin, Denton, and Tarrant County matters, clients usually come in when the stress turns constant: lawsuits, collection pressure, and debts like medical bills and credit cards that keep growing. Many are less worried about “garnishment” and more worried about bank account freezes and being sued.
Our Approach: We start with the basics the trustee will focus on in the Northern District of Texas (Dallas and Fort Worth divisions): what you earn, what you own, and whether disclosures are complete. We help clients gather pay stubs, tax returns, and bank statements, confirm the required credit counseling, and prepare accurate schedules so the trustee review and 341 meeting do not turn into a paperwork scramble.
Typical Outcomes: When Chapter 7 is the right fit, the automatic stay usually stops most collection activity quickly. Many cases are “no-asset” cases where people keep what they own, and discharge often happens in a matter of months if deadlines are met.
Takeaway: What catches people off guard is not the filing. It is what they do right before filing: paying one creditor, moving money, or making transfers that raise trustee questions. Slow down, get your documents together, and make sure the chapter choice matches your real goal: fast relief or time to catch up.
1. You Need the Automatic Stay to Stop Collection Pressure
Filing bankruptcy triggers the automatic stay. This is a court order that stops most collection actions right away.¹ It can pause lawsuits, calls, letters, and many collection efforts.
Texas wage garnishments for consumer debts are not the main threat in many cases. But bank account freezes and lawsuits are.⁵
2. Credit Card Debt and Medical Bills Have Become Unpayable
Chapter 7 is often used when unsecured debts like credit card debt and medical bills keep growing even when you cut expenses. A discharge can remove your legal duty to pay many of those debts.³
3. You Are Facing Foreclosure or Repossession and Need Breathing Room
The automatic stay can temporarily pause foreclosure or repossession activity.¹ This does not erase a home mortgage or auto loans, but it can give time to decide on the best move.
If catching up requires a repayment plan, Chapter 13 may fit better than Chapter 7.
4. A Lawsuit Judgment Is Turning Into a Real Collection Problem
When a creditor gets a judgment, the risk is no longer just phone calls. It can become a bank levy, a lien issue, or aggressive collection steps that disrupt daily life.
Bankruptcy can stop the escalation and create one supervised process.¹
5. You Want to Protect Exempt Property While You Clear Debt
Bankruptcy is not only about wiping out debt. It is also about protecting certain property through exemptions.
Texas lets you choose between state or federal exemptions when you file. Most people choose Texas exemptions because the limits are higher.
| Protected Property | Texas Exemption |
|---|---|
| Primary Residence | Unlimited equity (10 acres urban / 100 acres rural single / 200 acres rural family) |
| Personal Property | Up to $50,000 (single) or $100,000 (married) |
| Vehicle | One motor vehicle per licensed household member |
| Retirement Accounts | 100% protected (IRAs, 401(k)s, pensions) |
| Tools of Trade | Covered under personal property cap |
Source: Texas Property Code § 41.002 (homestead acreage limits), Texas Legislature Online.
Important Note for Recent Homebuyers: Texas homestead protection can be very strong, but federal law can limit protected equity for certain recent purchases. If you bought your home within the last 1,215 days and your equity may be above the cap discussed later in this guide (noted as about $214,000 for cases filed on or after April 1, 2025, with periodic adjustments), talk with an attorney about timing before you file.
Texas often protects large categories of property, including homestead limits based on acreage rules, and personal property limits that differ for individuals and families.⁵
Most Chapter 7 cases in Texas are “no-asset” cases. That usually means the trustee does not sell property to pay unsecured creditors.
6. You Need a Clean, Court-Supervised Process Instead of Juggling Creditors
Chapter 7 replaces chaos with one bankruptcy process: a petition, a trustee review, and one meeting with the bankruptcy trustee in most cases.³
For many people, the structure alone lowers stress.
7. You Need a Real Path Back to Financial Stability and Credit Repair
Chapter 7 can feel scary if you already have a low credit score. But endless late payments can be worse. Bankruptcy stays on a credit report up to 10 years, but many people start rebuilding much sooner with on-time payments and fewer debts.⁸
What Texas Bankruptcy Courts Consider in Chapter 7
Texas bankruptcy courts consider eligibility, honesty, and exemption claims when reviewing Chapter 7 cases. The court and trustee focus on what you earn, what you own, and whether disclosures are complete.
Key issues often include:
- Means test and income review (regular income can change options)
- Whether assets are exempt property under Texas or federal exemptions⁹
- Recent transfers, gifts, or paying family members before filing
- Spending on luxury goods shortly before filing
- Whether you completed credit counseling and the later financial management course²³
- Whether any tax debts or other certain debts fall into non-dischargeable categories³
The 1215-Day Rule Recent Homebuyers Must Know
Federal bankruptcy law has a 730-day residency rule for using Texas exemptions, and it can affect people who moved recently.⁶
There are also federal limits that can apply in narrow homestead situations. The 1215-day lookback cap (about 3 years and 4 months) limits homestead protection to about $214,000 in equity for cases filed on or after April 1, 2025. This cap adjusts periodically.⁷
Why does this matter? If you bought a DFW home in 2022 or 2023 and your property has appreciated significantly, you may have equity above this cap. That excess equity could be at risk in a Chapter 7 filing.
Bottom line: If you bought your home within the last 3.3 years, discuss timing and equity with an attorney before filing.
Common Mistakes We’ve Seen
Most bankruptcy problems come from avoidable moves made during financial difficulties. The safest approach is to be honest, document everything, and get legal advice before shifting money or property.
Common mistakes include:
- Waiting until after a bank account is frozen or a car is repossessed
- Paying one creditor while ignoring others right before filing
- Trying to “sell” or “transfer” assets to friends or family to protect them
- Assuming all tax debts or secured debts automatically go away
- Filing without understanding that a trustee can review transactions and object³
You may read online that “Texas protects you, so collectors can’t touch you,” but real-life threads often show people worried about the house and the car. One example is this recent discussion: https://www.reddit.com/r/Bankruptcy/comments/1pomapd/bankruptcy_in_texas/
Bankruptcy in Texas can protect a lot, but the details decide the outcome.
Frequently Asked Questions about Reasons to File Bankruptcy in Texas
Understanding the Reasons and Choosing the Right Chapter
What are the top reasons to file bankruptcy in Texas?
- Reasons to file bankruptcy in Texas: automatic stay, discharge, exemptions.
- Stop collection lawsuits, bank levies, and creditor harassment quickly.
- Erase many credit card balances and medical debt.
- Protect homestead exemption and retirement accounts when rules are met.
In my office at Warren & Migliaccio, L.L.P., the biggest reason is stopping the bleeding. When you file, the automatic stay under 11 U.S.C. § 362 usually stops most collection actions right away, including pending lawsuits and many collection efforts. In Texas, wage garnishment is not the main threat for most consumer debts, but bank freezes and lawsuits are. That is why the stay matters in real life.
Chapter 7 can then discharge many unsecured debts under the Bankruptcy Code, which is why medical debt and credit card debt are common triggers. The right chapter still depends on your financial situation and the means test. If you need time to catch up on a home or car through monthly payments, Chapter 13 may be the better tool.
What is the difference between Chapter 7 and Chapter 13 bankruptcy in Texas?
For many reasons to file bankruptcy in Texas, Chapter 7 is a quick discharge of qualifying unsecured debt. Chapter 13 is a 3 to 5-year court-approved repayment plan with monthly payments overseen by a trustee.
The difference is really about goals and cash flow. Chapter 7 is often a fit when you are mainly dealing with unsecured debt like credit cards and medical debt and you pass the means test. Chapter 13 is often the better fit when you have regular income and need a structured way to catch up on missed mortgage or car payments while keeping property.
Both types of bankruptcy trigger the automatic stay under 11 U.S.C. § 362, which is why people file to stop lawsuits and creditor harassment. The big practical contrast is what happens next:
- Chapter 7: trustee review, one 341 meeting, then discharge in months
- Chapter 13: plan payments for years, with the trustee supervising distribution
No matter which chapter you choose, some debts often survive, including child support and many student loans, and some tax debts depend on the facts.
Pick the chapter based on what you need most: fast relief or time to catch up.
Is filing bankruptcy in Texas worth it, and can it help my credit?
Yes, reasons to file bankruptcy in Texas include stopping late-payment damage and giving you room to rebuild credit.
Here is the honest framing I give clients: bankruptcy is not a magic fix, but it can stop the spiral. Chapter 7 stays on your credit report up to 10 years, but the Consumer Financial Protection Bureau notes that many people can start rebuilding much sooner once the debt load is reduced. If you are already missing payments every month, that ongoing damage and stress often hurts you more than a clean, court-supervised reset.
The fresh angle most people miss is what rebuilding actually requires after discharge:
- Make every payment on any kept secured debt on time
- Keep your budget tight for the first few months
- Watch your credit report for post-discharge reporting errors
Bankruptcy is also not always worth it when your problems are temporary or your biggest debts are non-dischargeable, like child support, many student loans, or certain tax debts.
After discharge, focus on on-time payments and monitoring your credit report, not chasing quick fixes.
Chapter 7 Eligibility and Timeline in Texas
Can I file Chapter 7 bankruptcy in Texas if I have a job and regular income?
Yes, reasons to file bankruptcy in Texas can apply even with regular income if the means test supports Chapter 7.
Having a job does not automatically push you into Chapter 13 bankruptcy. The means test is designed to compare income and expenses and decide whether Chapter 7 is available or whether a repayment plan is required. If Chapter 7 is not a fit, Chapter 13 can still give real relief by using a 3 to 5-year court-approved plan with monthly payments that a bankruptcy trustee oversees.
One detail people miss is timing. Before you file, you must complete credit counseling within 180 days under 11 U.S.C. § 109(h)(1). After you file, you must also complete the financial management course before discharge. I also see working clients hurt themselves by paying one creditor, borrowing from family, or moving money around right before filing. Those moves can create trustee questions even in an honest case.
Bring your recent pay stubs and tax returns to your consultation so I can run the chapter analysis quickly.
How long does Chapter 7 bankruptcy take in Texas?
For many reasons to file bankruptcy in Texas, a Chapter 7 case reaches discharge about four months after filing if you meet deadlines.
Most cases follow a predictable path. You complete credit counseling within 180 days before filing. Then you file the bankruptcy petition, which starts the case and triggers the automatic stay under 11 U.S.C. § 362. A trustee is appointed to review your schedules, assets, and Texas bankruptcy exemptions, and you attend the 341 meeting of creditors, often about a month after filing. After that, you finish the debtor education course and, in many cases, the court enters a discharge order around the four-month point.
Here is what usually causes delays: missing documents, incomplete schedules, or trustee questions about transfers, gifts, or luxury spending before filing. Even an honest case can slow down if the paperwork is not complete.
Do not treat the post-filing education course as optional. Missing it can delay or block your discharge.
What steps happen in a Texas Chapter 7 case from start to discharge?
- Confirm reasons to file bankruptcy in Texas with a means-test review.
- Complete credit counseling within 180 days before filing.
- File the bankruptcy petition to trigger the automatic stay.
- Attend the 341 meeting and answer trustee questions.
- Finish debtor education and receive the discharge.
Those five steps sound simple, but the details matter. The automatic stay is a real court order under 11 U.S.C. § 362, and most clients feel relief the moment it goes into effect. The trustee then checks your paperwork, your income, your asset disclosures, and whether the exemptions you claim are allowed.
Two edge cases deserve extra attention. First, if you moved to Texas recently, the 730-day residency rule can limit your ability to use Texas bankruptcy exemptions. Second, if you bought your homestead recently, federal law can cap protection in narrow situations under 11 U.S.C. § 522(p). The endnotes in your article note a cap of about $214,000 effective April 1, 2025, and that amount adjusts periodically.
My practical advice is to slow down before you rush to file. Gather pay stubs, tax returns, and recent bank statements so the petition and schedules are accurate the first time.
Protecting Property and Getting Help
Will I lose my house or car if I file bankruptcy in Texas?
No, reasons to file bankruptcy in Texas include protecting exempt property, but mortgage and car loan payments still matter.
Most Chapter 7 cases in Texas are “no-asset” cases, meaning the trustee does not sell anything because what you own is protected or has no non-exempt value. Texas has some of the most generous exemption laws in the country, and filers can generally choose between Texas or federal exemptions. Many people choose Texas exemptions because the limits are higher.
In your article, examples of commonly protected property include:
- A homestead, subject to acreage-based rules
- Personal property up to $50,000 (single) or $100,000 (married)
- One motor vehicle per licensed household member
- Retirement accounts such as 401(k)s and many IRAs
Here is the catch: exemptions do not erase a mortgage or auto loan. If you are behind, the automatic stay can pause foreclosure or repossession, but it does not make missed payments go away. That is when Chapter 13 may be the safer path.
Before you file, do an equity check on your home and vehicle and bring your loan statements to your consultation.
Can I file bankruptcy in Texas without a lawyer?
Yes, reasons to file bankruptcy in Texas do not require a lawyer, but mistakes in the petition and exemptions can cost you.
Texas filers are allowed to file pro se, and some very simple Chapter 7 cases do get through that way. The problem is that “simple” is hard to spot when you are stressed. The bankruptcy petition requires detailed schedules, accurate creditor lists, and correct exemption claims. If you miss a debt, leave out an asset, or misunderstand non-exempt property, the trustee can demand corrections and, in worse situations, object.
Two situations are especially risky without counsel: (1) you own a home and need to protect equity, and (2) you moved to Texas recently or bought a homestead within the last 3.3 years. Those facts can trigger exemption timing rules and, in narrow cases, a federal homestead cap under 11 U.S.C. § 522(p) that adjusts periodically.
At Warren & Migliaccio, L.L.P., we have helped North Texas clients since 2006, and our attorneys are Lead Counsel Verified. If you are considering filing on your own, I recommend at least a review consult before you submit anything.
Next Steps: Get a Clear Plan
If you are thinking about bankruptcy, the best next step is to get clear on the facts, not make decisions based on fear. Our attorneys at Warren & Migliaccio can review your income, debts, and property, explain whether Chapter 7 or Chapter 13 fits your situation, and help you understand what happens next. For a free consultation, call (888) 584-9614.
Legal Authorities (Endnotes)
- 11 U.S.C. § 362 (Automatic Stay), Cornell Law School Legal Information Institute: https://www.law.cornell.edu/uscode/text/11/362
- Credit Counseling Requirement, 11 U.S.C. § 109(h)(1), Cornell Law School: https://www.law.cornell.edu/uscode/text/11/109
- U.S. Courts, Bankruptcy Basics: Discharge in Bankruptcy (discharge timing, non-dischargeable debt categories): https://www.uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics
- U.S. Courts, Bankruptcy Filings Statistics (10.6% increase in filings, year ending September 2025): https://www.uscourts.gov/data-news/judiciary-news/2025/11/24/bankruptcy-filings-increase-10-6-percent
- TexasLawHelp.org, “Property That Can Be Protected from Judgment Creditors”: https://texaslawhelp.org/article/what-property-can-be-protected-from-judgment-creditors
- U.S. Bankruptcy Court, Northern District of Texas, Bench/Bar Conference Materials (exemption analysis): https://www.txnb.uscourts.gov/sites/txnb/files/basic/Exemptions.pdf
- National Consumer Law Center, “April 1 Increase of Federal Bankruptcy Exemptions” (11 U.S.C. § 522(p) homestead cap): https://library.nclc.org/article/april-1-increase-federal-bankruptcy-exemptions-other-dollar-amounts-0
- Consumer Financial Protection Bureau, “How long does a bankruptcy appear on credit reports?”: https://www.consumerfinance.gov/ask-cfpb/how-long-does-a-bankruptcy-appear-on-credit-reports-en-325/
- 11 U.S.C. § 522 (Exemptions), Cornell Law School: https://www.law.cornell.edu/uscode/text/11/522
No Attorney-Client Relationship Disclaimer: This article is for general information only and is not legal advice. Reading it or contacting our firm does not create an attorney-client relationship. Every case depends on specific facts, and you should speak with a qualified attorney about your situation.
