Chapter 13 Bankruptcy Lawyer Austin: Six Things the Plan Is Not

A Chapter 13 bankruptcy lawyer Austin homeowners call has usually heard the same six assumptions before. Chapter 13 is debt consolidation. The payment is whatever you can afford. Anyone can file it. It lowers the mortgage. Payments start when the judge approves the plan. And if the plan fails, the case is simply over. Each of those is wrong in a specific way, and the specifics are in 11 U.S.C. § 1322 through § 1328. Austin cases go to the Western District of Texas, where 2,753 of the 9,121 bankruptcy filings in the year ending June 30, 2026 were Chapter 13. This guide takes the six assumptions in order and replaces each with what the Code actually provides.

Not Consolidation — a Court Order That Binds Every Creditor

A consolidation loan is a private contract with one lender. A Chapter 13 plan is a court order. Under Section 1327(a), a confirmed plan binds the filer and every creditor, whether or not that creditor filed a claim or objected. Interest on unsecured debt stops. Collection stops under Section 362. Section 1301 even stays collection against a co-signer on a consumer debt while the case is pending, which no consolidation loan can do. The plan itself follows a district form. The Western District’s Local Rule 3015-1 requires its own plan form in place of the national one. The filer must serve any amended plan at least 28 days before the confirmation hearing, and objections are due 14 days before it.

Not “What You Can Afford” — Two Floors a Chapter 13 Bankruptcy Lawyer in Austin Calculates

The monthly payment has a legal minimum, set by two tests. The first is the best-interests test in Section 1325(a)(4). Unsecured creditors must receive at least what a Chapter 7 liquidation would have paid them. A filer with nonexempt property pays its value through the plan instead of losing it. The second is the disposable income test in Section 1325(b). If the trustee or a creditor objects, all projected disposable income for the commitment period goes to unsecured creditors. That period runs three years for a filer below the Texas median and five years for a filer above it. For cases filed on or after July 15, 2026, the medians are $66,837 for one person, $86,714 for two, $99,273 for three, and $117,962 for four. Secured arrears, priority taxes, and support obligations sit on top of whichever floor is higher.

Not for Everyone — the Limits a Chapter 13 Bankruptcy Lawyer in Austin Checks First

Section 109(e) restricts Chapter 13 to an individual with regular income whose debts fall under two ceilings. For cases filed since April 1, 2025, noncontingent, liquidated unsecured debt must be under $526,700 and secured debt under $1,580,125. A married couple filing jointly shares the same limits. Income can come from wages, self-employment, rent, Social Security, or a pension, but it must be steady enough to fund a plan. Section 109(h) requires a credit counseling briefing within the 180 days before filing. The filing fee is $313. Section 1328(f) adds a timing bar. No discharge is available to a filer who received a Chapter 7 discharge in a case filed within the past four years, or a Chapter 13 discharge within two.

Not a Mortgage Modification — What a Chapter 13 Bankruptcy Lawyer in Austin Can Do With the House

Section 1322(b)(2) forbids modifying a claim secured only by the filer’s principal residence. Rate, principal, and term stay as written. What the plan can do is cure. Section 1322(b)(5) lets the filer catch up missed payments over a reasonable time while regular payments continue. A homeowner eleven months behind spreads those eleven payments across the plan and resumes the regular payment at once. The cure right lasts until a foreclosure sale under Texas law is complete. In Travis County, that sale happens on the first Tuesday of the month. Car loans get different treatment. Section 1325(a)(5) allows the plan to pay an older loan at the vehicle’s value with an adjusted rate. A purchase-money car loan from the 910 days before filing has to be paid in full.

Not “After Confirmation” — the First Payment Is Due in 30 Days

Section 1326(a)(1) requires the first plan payment within 30 days after the petition or the plan, whichever comes first. Confirmation may be months away. The standing trustee for the Austin Division, currently G. Ray Hendren, holds those payments until confirmation, then distributes them. The meeting of creditors follows 21 to 50 days after filing, and since June 2024 the U.S. Trustee has run Austin meetings by Zoom. Attorney fees usually run through the plan too. Standing Order 25-04 sets the Austin Division benchmark for a non-business Chapter 13 at $4,900, plus $300 if the plan wins confirmation at the first hearing. Business cases carry a $5,400 benchmark. Under Section 1307(c), failing to start payments on time is itself grounds for dismissal.

Not the End — Exit Ramps When a Plan Breaks

Most plans that fail do so in year two or three, when a job change or a medical bill breaks the budget. The Code anticipates it. Section 1307(a) lets the filer convert to Chapter 7 at any time, and Section 1307(b) allows a voluntary dismissal. A hardship discharge under Section 1328(b) is available when the failure was outside the filer’s control and creditors already received what a Chapter 7 would have paid. A modified plan is a fourth option, and the Austin benchmark caps the fee for one at $1,000. What the exits cost is protection. Conversion exposes nonexempt property to a trustee. Dismissal returns every creditor to where it stood, with arrears now larger. Arizona filers face the same choices, as our guide to how the Chapter 13 payment gets calculated explains from that state’s side.

The Bottom Line

Chapter 13 in Austin is a court-supervised repayment plan with a statutory minimum payment, a statutory maximum length, and a first installment due before anyone has ruled on it. It cannot touch the terms of a home mortgage, but it can cure a default that a lender would otherwise foreclose on the first Tuesday of the month. The gap between the plan on paper and the plan in practice is 36 to 60 consecutive payments. The Code provides exits, but each one gives back something the plan was built to protect. A plan that survives is one where the budget was honest on the day of filing, not one that assumed the next five years would go better than the last five did.

Keep reading: Chapter 13 Repayment Plan Arizona: How the Payment Gets Calculated · Bankruptcy Automatic Stay: What It Actually Stops the Moment You File

---

This article is for general informational purposes only and does not constitute legal advice. Chapter 13 plan terms depend on individual income, debts, and property, and the dollar figures cited here adjust periodically. Anyone considering Chapter 13 should consult a licensed Texas bankruptcy attorney.

More guides on Bankruptcy

• Texas Homestead Exemption Austin: Five Situations, One Acreage Rule
• Chapter 7 Bankruptcy Lawyer Austin: Deadlines That Run the Case
• Bankruptcy Means Test Austin: Three Households, One Cutoff
• After Bankruptcy Discharge Arizona: What Actually Resets
• Stop Foreclosure Bankruptcy Austin: Four Dates That Decide It
• Subchapter V Bankruptcy Arizona: How Small Businesses Reorganize

All Bankruptcy guides →