Texas debt law
Texans filing bankruptcy can choose between two exemption lists, and the Texas list protects a home by acreage with no dollar cap. Below, Chapter 7, Chapter 13 and debt settlement side by side for Texans, and the situations where bankruptcy is the stronger option.
Who each option fits
Fits if
Watch out for
Fits if
Watch out for
Fits if
Watch out for
Side by side
The rows match our national comparison, with the Texas details that usually settle the question: the homestead, vehicles, paychecks and the court fees.
| What we compare | What we do Debt settlement | Chapter 7 in Texas | Chapter 13 in Texas |
|---|---|---|---|
| What it is | We ask each creditor to take less than the balance, and you pay the agreed amounts from an account held in your name. | A federal bankruptcy case in which a trustee may sell what neither your chosen exemption list nor a lien protects; the discharge then ends your duty to pay most unsecured debt. | A federal bankruptcy case built around a repayment plan the judge confirms, lasting 3 to 5 years, after which the eligible balance left over is discharged. |
| What it costs | What each creditor agrees to accept, plus our fee, which is charged only once a settlement is reached and appears as a separate line. | The court charges $338; a lawyer charges separately. | The court charges $313; you also pay a lawyer and the monthly plan amount. |
| How long | Most programs run 24 to 48 months. | Commonly a matter of months between filing and the discharge. | Three to five years of plan payments, set by what you earn. |
| Lawsuits and collection | There is no court shield: collection and lawsuits can continue, though Texas wages stay off limits to garnishment. | Filing triggers the automatic stay, which halts most lawsuits and bank garnishments. | The automatic stay starts the day the case is filed here too. |
| Your home and car | No trustee. A creditor with a judgment can pursue only property Texas law does not exempt. | The Texas homestead is protected by acreage, and one vehicle per licensed driver is exempt within the personal property cap. | Filers normally hold on to their property, including a financed home or vehicle, while the plan runs. |
| Credit report | Expect your score to fall while the program runs; settled accounts can stay on file for seven years, counted from the original delinquency. | The bankruptcy itself may appear for as long as a decade. | Also reportable for as long as a decade under federal law. |
| Tax on forgiven debt | Canceled balances may count as income, and the creditor may send an IRS Form 1099-C. | Debt ended by a bankruptcy discharge is not treated as taxable income. | The same bankruptcy exclusion covers debt discharged at the end of the plan. |
If a debt management plan or bankruptcy fits you better, we will tell you so. Free nonprofit credit counseling is a good first call for many people, and we will point you there when it is.
These are the Texas exemptions that matter most for households with card and medical debt. Some Texans do better with the federal list instead, and each item has conditions, so a bankruptcy attorney should make the choice with you.
| Property | What is protected | Where the law says it |
|---|---|---|
| Your home (homestead) | 10 acres in a city; 200 acres rural for a family, 100 for a single adult; no dollar cap. A home acquired within 1,215 days of filing is capped at $214,000. | Tex. Prop. Code § 41.002; 11 U.S.C. § 522(p) (Texas Legislature, opens in a new tab) |
| Personal property | Listed items up to $100,000 for a family or $50,000 for a single adult, by fair market value minus liens | Tex. Prop. Code § 42.001(a) (Texas Legislature, opens in a new tab) |
| Vehicles | One for each household member with a driver's license, or who relies on someone else to drive, within the cap | Tex. Prop. Code § 42.002(a)(9) (Texas Legislature, opens in a new tab) |
| Household goods and clothing | Home furnishings, heirlooms, clothing and two firearms; jewelry up to 25% of the cap | Tex. Prop. Code § 42.002(a) (Texas Legislature, opens in a new tab) |
| Retirement and health savings | Tax-qualified plans, IRAs, Roth IRAs, inherited IRAs and health savings accounts | Tex. Prop. Code § 42.0021 (Texas Legislature, opens in a new tab) |
| Current wages | Exempt, and not counted in the personal property cap | Tex. Prop. Code § 42.001(b)(1) (Texas Legislature, opens in a new tab) |
Chapter 7 starts with a means test. If your household income is below the state median (U.S. Courts, opens in a new tab) for its size, the test is usually not a barrier; above it, a second calculation looks at what you could repay. These are the Texas figures the U.S. Trustee Program uses.
| Household size | Texas median income |
|---|---|
| 1 person | $66,837 |
| 2 people | $86,714 |
| 3 people | $99,273 |
| 4 people | $117,962 |
| Each person over 4 | Add $11,100 |
These are the U.S. Trustee Program figures for cases filed on or after July 15, 2026 (the current table (U.S. Trustee Program (DOJ), opens in a new tab)). They change during the year; check the table on the day you file.
Texas has four federal bankruptcy districts. Each court publishes information for people filing without a lawyer, and each points to legal help first.
| Court | Where it sits | Help without a lawyer |
|---|---|---|
| Northern District of Texas | Dallas, Fort Worth, Amarillo, Lubbock, Abilene, San Angelo and Wichita Falls | The court's self-help page (U.S. Bankruptcy Court, N.D. Texas, opens in a new tab) |
| Eastern District of Texas | Beaumont, Plano, Tyler and Lufkin | The court's self-help page (U.S. Bankruptcy Court, E.D. Texas, opens in a new tab) |
| Southern District of Texas | Houston, Galveston, Corpus Christi, Brownsville, McAllen, Laredo and Victoria | The court's self-help page (U.S. Bankruptcy Court, S.D. Texas, opens in a new tab) |
| Western District of Texas | San Antonio, Austin, El Paso, Midland and Waco | The court's self-help page (U.S. Bankruptcy Court, W.D. Texas, opens in a new tab) |
In many cases it is. Bankruptcy is a legal right, and the Texas exemptions are broad. If any of these describe you, speak with a bankruptcy attorney before you choose anything else.
Clear Financial is not a law firm. Whether you qualify, which exemption list suits you and what you would keep are answers only a bankruptcy attorney can give.
Federal law lets a filer use the federal exemption list (Cornell LII, opens in a new tab) unless the home state has opted out, and Texas is one of the states that offers that choice (Texas Comptroller of Public Accounts, opens in a new tab). You pick one list for the case, not items from both.
The Texas list is only open to people who have lived in Texas for the 730 days (U.S. Bankruptcy Court, S.D. Texas, opens in a new tab) before filing. Someone who moved here more recently generally uses the exemptions of the state they lived in before.
Which list protects more depends on your home equity, vehicles, savings and household, which is exactly the analysis a bankruptcy attorney or legal aid office does.
Settlement can make sense when your income is steady, you can put the same amount aside every month, and no creditor has sued. There is no court filing or trustee, and you decide which accounts to include.
The trade-offs are real. Your score will fall during the program, creditors can keep collecting and can sue, our fee applies, and forgiven debt may be taxable1. The CFPB (CFPB, opens in a new tab) warns about the same risks.
Complete a briefing from an approved nonprofit agency within the 180 days before you file (Cornell LII, opens in a new tab).
File in the district where you live. The court charges $338 to open a Chapter 7 case and $313 for Chapter 13; your lawyer bills separately.
Most filers must finish a debtor education course (U.S. Trustee Program (DOJ), opens in a new tab) before a discharge is granted.
The court order that ends your legal duty to pay the debts it covers. Most student loans, some taxes and support are not covered (U.S. Courts, opens in a new tab).
The covered debts are overFederal court guidance for people who file on their own says advice from a qualified attorney is strongly recommended (U.S. Courts, opens in a new tab), because the outcome affects your finances and legal rights for years.
Federal law lets a bankruptcy case appear on credit reports for as long as 10 years (Cornell LII, opens in a new tab). An account that was charged off or sent to collections, whether or not you later settle it, has a seven-year limit counted from when it first went delinquent.
For a plain list of how long each kind of negative item may stay, see the CFPB (CFPB, opens in a new tab). Checking your own reports costs nothing.
Where to get legal help
We are not a law firm and cannot give legal advice. These are the people who can, many of them free. None of them pays us, and we do not pay them.
A bankruptcy attorney
Ask for a bankruptcy lawyer. The first consultation, up to 30 minutes, costs no more than $20. Phone (800) 252-9690.
Open the State Bar of Texas (opens in a new tab)Legal aid
Plain-language Chapter 7 and Chapter 13 fact sheets from Texas Legal Services Center, with links to free legal aid for people who qualify.
Open TexasLawHelp.org (opens in a new tab)Before you file
The federal courts explain what filing on your own involves, and strongly recommend advice from a qualified attorney first.
Read the U.S. Courts page (opens in a new tab)Legal aid
Legal aid offices give free civil legal help to people who qualify. The Legal Services Corporation finder lists the office for your area.
Find legal aid (LSC) (opens in a new tab)Things you should know
Read these before you enroll anywhere, including with us. They apply to every debt settlement program.
Notes on the figures and claims above
Straight answers
Rather hear it from a person? 866-659-7966
Many filers can. The Texas homestead exemption protects a home by acreage with no dollar cap, though a home acquired within 1,215 days (about 40 months) before filing is capped at $214,000. You must keep paying any mortgage. A bankruptcy attorney can check your case.
The Texas list exempts one vehicle for each licensed driver in the household, counted inside the $100,000 family or $50,000 single personal property cap. A loan on the car still has to be paid to keep it.
It depends on what you own. Texas lets you choose either list, but not both, and you need 730 days of Texas residence to use the Texas list. A bankruptcy attorney or legal aid office can compare them for your situation.
Not always. Bankruptcy halts lawsuits and discharges debt without tax, but stays on a credit report longer. Settlement avoids court but gives no protection from a lawsuit. Your income, property and whether you have been sued decide it.
Where the facts on this page come from. Each link opens the original in a new tab.
Next step
If settlement could fit, try an illustrative estimate that lists our fee on its own line. If bankruptcy looks like the better route, we will tell you.
Four short steps
Your estimate first. Contact details last.
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