Texas’ generous bankruptcy exemptions make Chapter 7 easier for more

Very few Texas filers need to fear losing anything in a Chapter 7 bankruptcy.

If you live in Texas and are having financial problems, you may have heard about the fast relief that filing Chapter 7 can bring. However, you may have also heard that you will have to sell your property during the process, so you have not pursued the matter further. Fortunately, most Chapter 7 filers in Texas lose no property at all, due to the strong bankruptcy exemptions in Texas.

While it is true that Chapter 7 involves a liquidation sale, where assets are sold to pay the filer's debts, the sale only applies to assets that are not exempt from the sale by federal or state law. Although Texas filers may choose between the federal and state property exemptions, most choose the Texas exemptions, because they are generally more generous. As a result, most assets are protected from being sold during Chapter 7.

What is protected?

Your home is likely the most important asset that you have. Fortunately, the homestead exemptions laws in Texas are among the most generous in the nation. Under the law, you can exempt your primary residence, including any improvements on the property (such as a swimming pool). There is no monetary limit on the exemption, but there are limits regarding the size of the property. The exemption is limited to 10 acres in an urban area and up to 100 in a rural one.

Aside from the homestead exemption, Texas' exemption laws protect your most valuable personal property from being sold in the liquidation sale. Under the law, up to $30,000 of your personal property is exempt from the sale. If you are married, the exemption doubles to $60,000. Eligible personal property for the exemption includes:

  • Furnishings
  • Clothing
  • Heirlooms
  • Jewelry (limited to $15,000)
  • Tools used for your business
  • Bicycles
  • Pets
  • One motor vehicle per licensed driver living in your household

If you have significant assets that are not exempt from liquidation, do not fear, as bankruptcy still may be able to help. In such a situation, Chapter 13 bankruptcy can offer much of the same debt relief as Chapter 7. However, in Chapter 13, there is no liquidation sale, so there is no threat of losing any property.

If you are struggling to pay your bills, it is imperative to seek expert advice as early as possible, when your options are the greatest in number. An experienced bankruptcy attorney can outline the debt relief options available to you and recommend the best way to proceed.