More than most other states, Texas protects its residents from their creditors with relatively generous exemptions both for their homestead and for their personal property.
FLEXIBILITY ABOUT FEDERAL OR TEXAS EXEMPTIONS
In bankruptcy, exemptions determine which and how much of your real estate and personal property is protected from your creditors. Specifically in bankruptcy proceedings, the bankruptcy trustee acts on behalf of your creditors, so the exemptions protect your assets from the clutches of the trustee.
Texas’s exemption law is flexible in allowing us to use either one of two sets of exemptions, the one in Texas state law or the one in the federal Bankruptcy Code. Overall the Texas exemptions are much more generous than the federal ones and so are generally the ones used by people filing bankruptcy in this state. But you could have an unusual situation in which the federal ones are better, so it’s good to have that option. More than 30 states don’t allow this option, requiring people to use the state law exemptions even when the federal one would have provided more protection.
TEXAS EXEMPTIONS FOR PERSONAL PROPERTY (NON-REAL ESTATE)
Texas is also quite flexible in how its personal property exemptions work. Most states give a list of categories of property – vehicles, furniture, tools of trade and such – and then provide a maximum dollar amount in value allowed as exempt in each category. So if you had any particular possession that is more valuable than the average, then you would have much more of a risk of losing it. Instead, the Texas law groups together most (but not all) personal property and then gives a relatively generous exemption amount for whatever you own within this broad group. The amount for that broad category is $30,000 for a single person or $60,000 for a family with two spouses. This broad group includes furniture, clothing, jewelry, tools of trade, one vehicle per person, two firearms per person, and farm animals and household pets.
Note that in the case of vehicles and other collateral with debt against them, you only need to include the dollar amount of your equity AFTER subtracting off the amounts that you owe against it. If you owe on a vehicle loan, often you have either no equity or very little.
And then beyond this $30,000/$60,000 group exemption, Texas provides some additional exemptions: all wages (except as to child support), prescribed health aids, alimony and spousal or child support already received, health savings accounts, many kinds of insurance benefits and most retirement accounts.
THE HOMESTEAD EXEMPTION IN TEXAS
Texas is one of just a handful of states that protect debtors’ homes without a limit in value. The state’s homestead exemption is based on acreage, without regard to value. So your home and its equity is protected from your general creditors no matter how much it is worth or how much equity you have in it. Most states have a maximum amount you can protect, and if you have more value or equity in your home, then the home could be sold to pay your creditors. But not in Texas.
The acreage maximums are, for most situations, more than adequate – up to 10 acres in a city, town or village, 100 acres in the country (or 200 acres for a family).
There IS a dollar limitation if you bought your Texas home fewer than 1,215 days (about three and 1/3rd years) before filing your bankruptcy case. That maximum is $155,675 (for the three-year period starting April 1, 2013). The point of this provision is to prevent people from sheltering large amounts of money from their creditors by putting it into real estate a relatively short time before filing for bankruptcy.
If you live in the Dallas-Fort Worth metroplex, allow us to help you get the full benefit of the Texas exemptions. Schedule a no-obligation, free, confidential consultation by contacting us at The Law Offices of Roger Fuller either by calling 214-516-6187 or by reaching us here. Thank you for visiting our website.