There are both federal and state exemptions for Chapter 7 bankruptcy. Texas is one of the states that allows someone seeking bankruptcy to choose which category of exemptions they want to use.
The federal homestead exemption last adjusted in 2019 allows you to protect up to $25,150 in equity. If you choose to use the Texas exemption when filing Chapter 7 bankruptcy, the law is actually very generous.
What real estate can you potentially protect from liquidation or sale in a Chapter 7 bankruptcy with the Texas homestead exemption?
The location of the property determines your exemption
In most states, as with the federal law, the exemption for your homestead is a specific amount of equity. However, in Texas, the exemption allows you to protect parcels of land and the improvements on them if the land serves as your primary residence.
For those who live in areas such as cities, villages or towns, the property can be no larger than 10 acres. For single individuals who live in the country, the exemption is 100 acres. If someone lives on a rural property with their family, they can protect up to 200 acres. It’s also worth noting that the acreage protected does not all have to be included in a single parcel.
The more property you own, the more valuable the Texas homestead exemption may be. For those who don’t have much acreage but who have substantial value in their home, the Texas exemption may be the better choice than the federal homestead exemption. Looking at all of your assets can give you a better idea of which exemptions will benefit you the most in a Chapter 7 filing.