Bankruptcy in Texas: what property is exempt?

May 30, 2013 (Press-News.org) Bankruptcy in Texas: what property is exempt?

Article provided by Wyatt & Gracey, PC
Visit us at http://www.wyattpllc.com/

A misleading and persistent rumor says if you file for bankruptcy protection, you have to sell your property to pay your debt. It is true that in Chapter 7 bankruptcy, certain types of your property may be sold. However, the only type of property that may be sold is called nonexempt property--property that is not exempt from the bankruptcy estate.

How exemptions protect your property

Exempt property is removed from the bankruptcy estate by law, meaning that it cannot be sold to pay debts. Both Texas and federal law lists types of property that are exempt. When you file for bankruptcy in Texas, you have the option to choose which set of exemptions--state or federal--that you would like to use. Although you have a choice, most homeowners choose the Texas exemptions, because they allow you to keep more property.

One of the biggest exemptions under Texas law is the homestead exemption. This exemption allows bankruptcy filers to keep their primary residence--up to 10 acres in a city or 100 acres in the country--out of the bankruptcy estate. There is no limit on the value of the property, under Texas law, so homeowners can keep all improvements to the property, such as a swimming pool.

Since the homestead exemption keeps the primary residence outside the bankruptcy estate, it prevents the home from being sold to satisfy debts in a Chapter 7 bankruptcy. Additionally, the exemption can assist those filing Chapter 13 bankruptcy, as the value of the home is not considered when the court calculates the monthly payments in the payment plan.

Although the exemption can help bankruptcy filers, it has no effect on a bank's ability to foreclose, if you get behind on your mortgage.

In addition to the homestead exemption, Texas law allows bankruptcy filers to exempt important personal property from the bankruptcy estate. However, the value of the property is limited to $60,000 for married couples and $30,000 for single adults, excluding any liens or encumbrances. Under the law, the types of personal property that may be claimed as exempt (up to the limit) are:

-Furniture and heirlooms
-Motor vehicles (one per licensed driver)
-Clothes
-Pets
-Tools and other equipment
-Jewelry (limited to a value of $15,000)
-Bicycles and athletic equipment

The purpose of the personal property exemption is to allow bankruptcy filers the ability to keep their most important personal items, as well as items that are relied on to make a living, from being sold. Note that CASH is not an available exemption under Texas State law although some may be exempted under the Federal set of exemptions.

A bankruptcy attorney can help

As this is not an exhaustive list of exemptions, it is important to seek the advice of an attorney if considering bankruptcy. An attorney can consider your personal situation and recommend an option that will ensure that you get the maximum benefit from the exemptions available to you by law.