SUMMARY: Bankruptcy allows you to use “exemptions” to protect your property. With proper pre-bankruptcy planning, most people are usually able to keep all of their property.
What Can You Keep?
Most people are able to keep all of their property when they file bankruptcy. State and federal laws provide what are called “exemptions” or protection. Exemptions are used to protect property from liquidation or sale in a bankruptcy. Each state has its own set of exemption laws. In Texas, usually residents can choose either the federal exemptions or the Texas state exemptions.
Which exemptions to use depends on what property you want to keep and how much it is worth. If you have a large amount of home equity, the Texas exemptions may be best. If you have a nest egg of cash, federal exemptions may be better. If you can’t protect all of your property through exemptions, you can consider choosing to file a Chapter 13 bankruptcy and pay back a portion or all of the debt.
The most important thing is to list all of your assets in bankruptcy. Failure to disclose assets is a sure way to lose them.
Texas State Exemptions
- Rural homestead up to 200 acres for family no how much the home is worth
- One vehicle per licensed driver
- Household goods up to $100,000 for a family
- 401(k), IRA or other pension plan
- Annuity with certain limits
- Life insurance – cash value or proceeds already paid
- Child support or alimony
- Farming tools and equipment
Various rules and restrictions apply to the use of exemptions in bankruptcy. Consult a knowledgeable bankruptcy attorney who can advise you on the details of what property you may exempt. If property is not exempt, a debtor may also be able to file a Chapter 13 bankruptcy and pay the liquidation value of the property. Before transferring or selling any assets, you should consult with a bankruptcy attorney.
Keeping Property if You Just Moved to Texas
So, you’re not from Texas, but you got here as fast as you could? If you are a new Texas resident, the exemptions you use to protect property may be different. To use the Texas exemptions, you must have lived in Texas for the last 730 days. You only have to be here for about 3 months to file bankruptcy in Texas, but to use the Texas exemptions, you have to be here longer. There’s a formula that applies for exemptions if you have lived in multiple states right before filing. Trust me — you don’t want to read about it. All of this can be extremely technical and complex. You need to consult with a bankruptcy attorney to know exactly what date you can file bankruptcy in Texas, and what exemptions can be used by you. The exemptions that apply are critical because this is how you protect your property from liquidation in a Chapter 7 bankruptcy. Exemptions will also affect how large your required plan payment is in a Chapter 13 bankruptcy.
Your Next Step to Debt Relief
If you are struggling with debt, consult with an attorney who can give you guidance on options available to you. Each case is different and consultation with an attorney knowledgeable about the law as it applies to your particular circumstances is an important first step in resolving debt.
Read More About Bankruptcy and Debt Relief
Chapter 7 – Usually the cheapest and fastest type of bankruptcy, Chapter 7 can wipe out credit cards, medical bills, and loans.
Chapter 13 – Does everything that Chapter 7 does, but with the added benefit of being able to help catch up on past due mortgages, car payments, and taxes.
Taxes – If you owe money to the IRS, there may be several different options for you, including some non-bankruptcy options.
Student Loans – There are many solutions to student loan issues, including getting a better payment plan, curing a default, and even loan forgiveness.
Debt Lawsuit Defense – When a creditor sues you over a debt, you can respond with a defense, which may allow you to win the lawsuit.
Loan Modifications – A special agreement between you and your mortgage lender might help you with a past due mortgage loan.
Debt Library – More in-depth articles on some of the more detailed areas of bankruptcy and debt relief.