What Debts Are Dischargeable in Bankruptcy Under Texas Law?
Bankruptcy is a great option for some people; for others, it is not the best choice. If it’s right for you, it could be a great way to get a fresh start in life. Whatever you’re thinking, reach out to a Dallas bankruptcy attorney right away so you can get specific advice appropriate to your unique circumstances.
Debts and Bankruptcy Under Texas Law
The first thing to determine is whether you are filing for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is known as liquidation and requires you to list all your assets and debts in filing with the bankruptcy court, who then appoints a trustee to sell your assets in order to pay your debts and apportion them out fairly to your various creditors. Most debts can be discharged under Chapter 7.
In a Chapter 13 bankruptcy, you are required to repay some or all of your debt by setting up a repayment plan. In this situation, the trustee of your bankruptcy will be tasked with investigating your financial situation in order to make sure the payment plan is fair to you and to your creditors and that you have a good chance of paying down your debts. At the end of Chapter 13 bankruptcy, any unsecured debts that you still have are discharged. Unsecured debts are things like credit card debt. Secure debt would be debt you still owe on your home or car, where the property or the vehicle itself serves as security for your debt.
Dischargeable Debts
Chapter 7
In a Chapter 7 bankruptcy, you can have your utilities turned back on if they have been terminated because of unpaid bills, eliminate most if not all of your debts, including credit card debt, and get your driver’s license restored if you had it suspended because you did not pay damages for an accident that the court ordered you to pay. (The only exception here is if the damages you caused were the result of a DUI. In that case, you are still responsible to pay damages).
You cannot discharge any recent IRS debts, your student loans, your property taxes, or any past-due child support you may owe. You also cannot be discharged from fees, penalties, fines, and restitution that you have been ordered to pay because of criminal activity. If you have a loan with a cosigner, your declaration of bankruptcy cannot nullify their co-signing on the loan. That means while you may no longer be responsible, they are.
Finally, it’s important to understand that if you have secured loans on homes or cars, you won’t lose your home or car only so long as you continue to pay on these loans. You can have these loans discharged, but if you do, the lender has the right to take the property or car in payment of the debt. Essentially, you will need to decide whether you want to set up a plan to keep making these payments or whether you want to let this property go.
Chapter 13
As mentioned above, with Chapter 13 bankruptcy, most of your debt is not discharged. Instead, you set up a payment plan in order to pay it down. This plan is set in place by the court and the trustee and will typically run from 3 to 5 years. So long as you make your payments faithfully during this time, at the end of the time, any balance left on your unsecured debts, like a credit card, would then be discharged.
As with Chapter 7 bankruptcy, with Chapter 13 you cannot discharge student loans or property taxes, child support, fines or restitution for criminal activity, or IRS debt. You can also still lose your home or vehicle if you do not make payments on these debts.
Deciding Which Bankruptcy You Qualify For: Talk With a Dallas Bankruptcy Attorney
It’s always best to talk with a Dallas bankruptcy attorney to decide the best way forward. Generally speaking, if you have steady income, you are more likely to qualify for a Chapter 13 bankruptcy. Chapter 7 bankruptcy is more difficult to qualify for, and you must take something called a “means test.” This test uses a formula to compare your assets, income, and debt to see if you qualify. While most people assume that you have to be unemployed or in poverty to qualify for Chapter 7, that is not the case. Even some fairly high-income individuals can qualify if they have unusually high debts.
Effect on Credit
Both types of bankruptcy will certainly affect your credit, but Chapter 7 bankruptcy has a much longer lasting effect. It will remain on your credit report for 10 years from the time that you file for bankruptcy, and this is something serious to consider. If you have a debt that is in arrears, for example, that will only remain on your credit report for 7 1/2 years. If it’s possible for you to get caught up and pay that debt without declaring bankruptcy, you will have a clear credit history more quickly than if you file for Chapter 7. A Chapter 13 bankruptcy remains on your credit for seven years.
A bankruptcy notice on your credit report means that any time any entity checks your credit, they receive a notice telling them that in the past you have failed to pay your creditors what you promised. This can make it very difficult to get credit, even if you have turned things around and your finances are in good shape.
When You Have Nothing to Take
In some cases, it may not be necessary to file for bankruptcy if you are what Texas law calls “judgment proof.” If you are, this means that you have nothing which it is legal for your creditors to seize. The law exempts certain property from creditor claims, and since you can’t go to jail for failing to pay a debt, there is really nothing that can be done against you. In this case, filing for bankruptcy may simply destroy your credit for no good reason.
It’s likely you may be judgment-proof if you have low income and don’t own anything of value other than property that is exempted by law, or if all your income comes from a source that is exempt from pursuit by creditors. The law does not allow your creditors to take Social Security or Social Security disability, public assistance, retirement benefits, workers’ compensation, veterans’ benefits, unemployment benefits, or anything you may be receiving for child support or spousal support.
Exempt property includes up to one vehicle for each licensed driver who lives in your home and your home itself, and up to 10 acres of property within a city and up to 100 acres in rural areas for a single person or 200 for a family. You can also exempt up to $30,000 worth of household items for a single person and up to $60,000 for a family, two firearms, bicycles, up to two horses, 12 head of cattle, and sporting equipment or tools you need for work.
To find out the best option for you if you’re facing financial difficulties, visit the Pelley Law Office in Plano, Dallas, or Sherman, TX today for a free consultation.
Contact Our Texas Bankruptcy Law Firm For Help Today
If you’re facing bankruptcy in Texas, we’re here to help. Contact the experienced bankruptcy lawyers at Pelley Law Office, L.L.P., today to schedule a free consultation.
We proudly serve Plano, Dallas, Sherman, and the surrounding areas.
Pelley Law Office L.L.P. – Plano Office
Address: 1312 14th St, Plano, TX 75074
Phone: (972) 608-0335
Hours: 24/7
Our firm is located near you. Find us with our GeoCoordinates: 33.0180322,-96.6952916,863
Pelley Law Office L.L.P. – Sherman Office
Address: 905 N Travis St, Sherman, TX 75090
Phone: (903) 813-4778
Hours: 24/7
Our firm is located near you. Find us with our GeoCoordinates: 33.6445846,-96.6113141,857
Schedule Your Free Consultation Right Now
Quit wasting time and making your situation worse by hoping your legal problems will go away on their own. They will not. Pick up your
phone and call us right now at 214-560-1919, or email us. Our experienced attorneys are ready to explain your options at a free
consultation. Why would you wait?
Locations
Get Started With
A Free Consultation
Fields Marked With An * Are Required
A Free Consultation
Fields Marked With An * Are Required
© Copyright 2026 Pelley Law Office, L.L.P.. All Rights Reserved.
