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Heavy debt can make it feel like you’re one step away from losing everything. But filing for Chapter 13 in Texas doesn’t mean giving up your home, your car, or the things you’ve worked hard for. This type of bankruptcy focuses on restructuring your debt (not erasing it all at once like Chapter 7) so you can stay current on payments and keep your property. It works more like a long-term repayment plan than a financial reset button.
At Toronjo & Prosser Law, we understand that losing your home, car, or other important belongings is often the biggest fear our clients face when considering bankruptcy. The good news is that Chapter 13 bankruptcy in Texas offers some of the strongest asset protection available anywhere in the United States.
Understanding How Chapter 13 Protects Your Assets
In Chapter 13, you generally will not lose your property. Instead of liquidating assets to pay creditors, you’ll develop a court-approved repayment plan that allows you to keep your belongings while paying back a portion of your debts over time.
The key principle behind Chapter 13 is that if you have nonexempt property (assets not protected by bankruptcy exemptions), you must pay creditors at least the value of that property through your repayment plan. This is known as the “best interests of creditors” test, ensuring that creditors receive through your Chapter 13 plan at least what they would have gotten in a Chapter 7 liquidation.
Texas Bankruptcy Exemptions: Your Shield Against Loss
Texas provides some of the most generous bankruptcy exemptions in the nation, significantly limiting what you could potentially lose in any bankruptcy proceeding. Most Texas debtors choose state exemptions over federal exemptions because of their superior protection.
Your Home Stays With You
In Texas, your primary residence is usually safe in Chapter 13. The state’s homestead exemption doesn’t cap your home’s value—just the size of the property. If your home sits on 10 acres or less in a city or up to 100 acres in a rural area (200 acres for families), it’s fully protected.
As long as you stay current on your mortgage and include any missed payments in your repayment plan, you can keep your home. That’s true even if it’s worth a lot.
Personal Property Stays With You
How much personal property can you keep? In Texas, it’s quite a bit. Single filers can protect up to $50,000, while families get up to $100,000 worth of belongings. This exemption covers:
- Furniture, clothing, appliances, family heirlooms, and household items
- Jewelry up to 25% of your total personal property exemption
- Two firearms per person
- Tools and equipment used in your profession
One Vehicle Allowed Per Licensed Driver
- One vehicle per licensed household member with complete protection of the vehicle’s value
- If you have two licensed drivers in your household, you can protect two vehicles
Retirement Accounts Are Safe
Worried about losing your retirement savings? You don’t have to be. In Texas, your 401(k), IRA, and pension are all fully protected.
What Happens to Property That Exceeds Exemptions
If you own property that exceeds Texas exemption limits, you won’t automatically lose it in Chapter 13. Instead, you a required to pay creditors the value of the nonexempt property via your repayment plan. For example, if you have a boat worth $30,000 that’s not covered by exemptions, you would need to pay that amount to unsecured creditors over your three-to-five-year plan period.
Handling Secured Debts and Property
For property that secures debts (like your home mortgage or car loan), Chapter 13 gives you flexible options:
Keeping Your Secured Property
To retain property that secures a debt, you must:
- Continue making regular monthly payments on the secured debt
- Include any past-due amounts in your repayment plan
- Meet the creditor’s requirements for keeping the collateral
If you fall behind again, the creditor can ask the court for permission to repossess the property, even during bankruptcy.
Cramdown Benefits
For certain secured debts (excluding your primary residence mortgage), you may reduce the debt balance to the property’s current fair market value through “cramdown.” This is particularly beneficial for vehicles purchased more than 910 days before filing.
Immediate Protection Through the Automatic Stay
When you file Chapter 13, the automatic stay immediately goes into effect, providing crucial protection:
- Stops creditor harassment and collection calls
- Stops wage garnishment
- Prevents vehicle repossession
- Halts foreclosure proceedings
- Prevents utility disconnections for at least 20 days
This protection gives you breathing room to reorganize your finances without the pressure of ongoing collection actions.
Your Commitment: Disposable Income
While you keep your assets in Chapter 13, you must commit all disposable income to your repayment plan. Disposable income is your monthly income minus allowed living expenses, calculated using IRS standards if your income exceeds the Texas median. This means you’ll have limited discretionary spending during your plan period, but you maintain ownership of your property.
When Property Might Be at Risk
While Chapter 13 bankruptcy is meant to protect your property, certain situations in Texas require close attention. If you hold a significant amount of cash that exceeds Texas exemption limits, that excess may need to be paid into your plan. Luxury items not covered by exemptions, such as boats, ATVs, or expensive jewelry, can also increase your monthly payments. And if you’re unable to complete the plan, your case could be dismissed or converted to Chapter 7, which may put non-exempt assets at risk.
Take Action Today to Protect Your Assets
Chapter 13 bankruptcy in Texas is designed to help you reorganize your debts while keeping your property. Thanks to Texas’s generous exemption laws, most debtors can protect all their assets and avoid property loss entirely. The trade-off is committing your disposable income to debt repayment, but this allows you to maintain your standard of living while addressing your financial difficulties.
Contact Our Experienced Texas Bankruptcy Attorneys
Debt hits hard, but losing your home or car doesn’t have to be part of the story. Chapter 13 bankruptcy gives you a path forward, and at Toronjo & Prosser Law, we’ve helped thousands of Texans across Dallas, Fort Worth, and beyond keep what matters most. Our team knows how to use Texas’s strong exemption laws to protect your property and create a plan you can actually stick to.
Call 214.609.8787 or visit our Southlake or Dallas page to schedule your free consultation.