Types

• Texans can file personal bankruptcy under Chapter 7 or Chapter 13 of the bankruptcy code, the U.S. Courts website states. In Chapter 7, the court may sell off some of your assets to pay off your creditors before "discharging" --- wiping out --- your debts; to file Chapter 7, your average income for the previous six months must be below the Texas median, unless you pass an income-adjusted "means test." In Chapter 13, you pay off as much of your debt as possible using your disposable income for three years --- if your income when you file is below the Texas median --- or five years, then receive a debt discharge.
  
  

Misconceptions

• Neither Chapter 7 nor Chapter 13 wipes out all of your debts. Alimony, child support, student loans and recent back taxes, for example, survive the bankruptcy discharge, the Nolo legal website states. Chapter 13 can't wipe out your mortgage; Chapter 7 discharges the mortgage but not the lender's claim on your house, so the lender can still foreclose if you don't make payments.
  
  

Geography

• Each state's law exempts certain kinds of property from being sold in Chapter 7 bankruptcy. In Texas, for example, your house is exempt, no matter what its value; the money gained from selling the house is exempt for six months afterward; and the personal property exemption includes 12 head of cattle and 60 head of other livestock, according to the Bankruptcy Information website. If most of your property is exempt, Chapter 7 might be a good bet; if not, consider other alternatives.
  
  

Prevention/Solution

• If your main concern is that debt collectors are harassing you and your family, Texas law may be able to protect you, the Consumer Credit Commissioner's office states. Under the law, debt collectors can contact you only between the hours of 8 a.m. and 9 p.m.; can't call you at work if your boss tells them not to; can't tell anyone else except your attorney about the debt; and must stop contacting you if you send them a certified letter requesting they desist. If collectors break the law, you can report them to the commissioner's office.
  
  

Alternatives

• If you don't want to file bankruptcy, you have other alternatives, Nolo states. You can negotiate with your creditors to work out a payment plan or a reduction in the debt. You can talk to a Texas credit-counseling agency certified by the U.S. Department of Justice --- the department maintains an online list --- and follow its advice. In some circumstances, there may be nothing your creditors can do: If all your income comes from Social Security, which is collection-proof, and you don't have any assets to file claims on, there's no way for them to squeeze any money out of you.