Many people who may otherwise be considering bankruptcy try to avoid it under the misconception that will lose all of their property. This is simply not the case. Bankruptcy in its very design allows a debtor to seek relief from creditors while protecting much of their property. This is especially true for debtors in Texas. The State of Texas is extremely debtor-friendly in the way that it offers a generous set of property exemptions in bankruptcy proceedings.
Exemptions in Bankruptcy Proceedings
Exempt property means that the property is exempt (i.e. protected) from creditor claims in bankruptcy proceedings. If filing for Chapter 7 liquidation bankruptcy , the exempt property cannot be seized by a bankruptcy trustee. There is a default set of bankruptcy exemptions provided by the federal Bankruptcy Code. Individual states, however, are allowed to create their own set of exemptions. Texas is one such state that created its own set of exemptions and gives bankruptcy filers the option to either select the federal or state-provided exemptions. Both exemptions schemes are highly beneficial, but for Texans that own real estate, the state exemptions are usually applied.
A few of the biggest benefits of the Texas exemptions are an almost unlimited exemption for a debtor’s homestead (i.e. primary residence) and one motor vehicle per driving member of the household. While federal exemptions only protect a set amount of equity in a home or vehicle, the Texas exemptions provide for unlimited protection of the equity in a homestead and one car per each debtor with a driver’s license. Homestead exemption only applies if the debtor uses it as an actual residence, not a rental property. It is also important to note that the Texas homestead exemption cannot be used for more than 10 acres in an urban area or 100 acres if located in a rural area. If the rural home is for a family, not a single person, the acreage limit increases to 200 acres. Additionally, proceeds of homestead property that has been sold may also receive exemption protection for up to six months. If you have debts and are considering bankruptcy, it is important that you call a Texas bankruptcy attorney prior to selling your home, as the attorney will be able to strategize with you on when the best time to sell would be (i.e. before or after bankruptcy).
In addition to the generous homestead and motor vehicle exemptions, there are several other types of property exemptions commonly utilized by Texas bankruptcy debtors. For instance, livestock, including up to 12 head of cattle, 60 head of other types, 120 fowl, and two horses, mules, or donkeys, may be exempted. This includes saddles, blankets, and bridles. Clothes used as “wearing apparel” as well as home furnishings or family heirlooms are also exempt. There is an exemption for jewelry as well. The jewelry exemption, however, is not to exceed more than 25% of the applicable total exemption amount. Two firearms may also be exempted as well as tools used for a trade or profession. The total personal property exemption under Texas state law is $100,000 per family or $50,000 per single person.
Dallas Bankruptcy Attorney
Despite the generous exemptions provided under Texas state law, the federal exemptions should also be considered, especially if you do not own a home. The federal exemptions allow for a “wildcard” exemption, that is commonly used for money in the bank, stocks, tax refunds, etc. The trusted bankruptcy attorneys at Toronjo & Prosser Law are here to discuss your options and evaluate what choices best protect your interests. Contact us today.