For many Texans, the fear of losing a home or a vehicle is what keeps them awake at night. If you are struggling with debt but have a steady income, Chapter 13 bankruptcy offers a principled path to financial recovery. Often called the "wage earner’s plan," Chapter 13 allows you to keep your property while reorganizing your debts into a manageable, court-supervised repayment plan.
Understanding how this plan is structured is the first step toward reclaiming your financial future.
Proposing Your Plan
The process begins with the submission of a proposed repayment plan to the bankruptcy court. This document outlines exactly how you intend to pay back your creditors over a period of three to five years.
In Texas, the length of your plan is largely determined by your income. As of 2026, if your household income is below the Texas median ($65,123 for an individual or $114,938 for a family of four), your plan may last only 36 months. If you are above the median, a 60-month plan is generally required.
Calculating Your Monthly Payment
Your monthly payment isn't a random number; it is calculated based on two primary factors: your disposable income and the value of your non-exempt property.
Disposable Income: This is the amount remaining after you have paid for "reasonable and necessary" living expenses. The court uses IRS standards to ensure these expenses are fair.
The "Best Efforts" Test: To have your plan confirmed, you must demonstrate that you are putting all your disposable income toward the plan. Additionally, you must pay your unsecured creditors at least as much as they would have received if your assets were liquidated in a Chapter 7 filing.
The Role of the Trustee
Once you file, a Chapter 13 Trustee is appointed to oversee your case. Unlike a Chapter 7 Trustee, who sells assets, the Chapter 13 Trustee acts as a central clearinghouse. You send one consolidated payment to the Trustee each month, and they distribute those funds to your creditors according to the priorities set in your plan.
Priority of Payments
Not all debts are treated equally under the plan. Your payments are typically distributed in this order:
Priority Debts: These must be paid in full (e.g., recent back taxes, child support, and alimony).
Secured Debts: These include your mortgage arrears or car loans. Chapter 13 is particularly effective in Texas for stopping foreclosures, as it allows you to "cure" a mortgage default over several years.
Unsecured Debts: These include credit cards and medical bills. Depending on your income, you may only pay back a small percentage of these debts, with the remainder being discharged at the end of the plan.
Taking the First Step
Navigating the complexities of the bankruptcy code requires a steady hand and an experienced advocate. At Norred Law, PLLC, we understand that bankruptcy is not just a legal process—it is a personal journey toward stability. We are committed to helping Texas residents design a repayment plan that protects their assets and provides a true fresh start.
To discuss your options and take control of your financial legacy, contact Norred Law, PLLC today at (817) 500-9433.