Chapter 7 bankruptcy is a relatively fast and aggressive way to handle unsecured debt. In successful cases, people can go from their initial filing to their discharge in a matter of months.
However, before the courts will grant the discharge of someone’s eligible unsecured debts, the filer will first need to disclose their personal resources so that the trustee appointed by the courts can determine whether they feel it is appropriate to liquidate some of their non-exempt property to pay off their creditors with the proceeds of the sale.
Those who qualify for Chapter 7 bankruptcy in Texas can apply either the Texas state or federal bankruptcy exemptions that allow them to protect certain property from liquidation. If you’re thinking about seeking bankruptcy protection but you’re concerned about safeguarding your investment in your home, you may be wondering how much home equity an individual can protect in a Texas Chapter 7 bankruptcy filing.
With Texas exemptions
Homeowners in Texas will frequently choose to use the state exemptions specifically because of how generous they are. While most states impose a strict financial limit on equity, sometimes only allowing people to protect a few thousand dollars of interest in their homes, Texas allows homeowners to sometimes protect all of their home equity in a Chapter 7 filing.
There is no maximum cap on the property value or equity, although there may be a limit on acreage. Those in urban settings can protect up to 10 acres of land. Rural property owners can protect 100 acres when filing alone or up to 200 when filing as a married couple.
In many states, someone with significant equity might need to pursue a Chapter 13 Bankruptcy to protect their home despite qualifying for Chapter 7 proceedings. Homeowners in Texas can protect their home equity regardless of the value of their home if their income qualifies them for a Chapter 7 filing.
Under federal exemptions
The federal bankruptcy exemptions are more generous than what people can protect in certain states, but they are not nearly as robust as the Texas state exemptions for real estate. In 2023, people filing using federal exemptions can potentially protect up to $27,900 in home equity. Any amount above that may be vulnerable to liquidation.
Individuals considering bankruptcy, especially a Chapter 7 filing that may put certain property at risk, need to review their financial circumstances carefully and educate themselves about available exemptions to see what they can protect before committing to a plan of action.
Learning more about Chapter 7 bankruptcy can help those unable to meet their financial obligations and hoping to protect their most valuable assets at the same time. Seeking legal guidance can also help potential filers weigh the pros and cons of Chapter 7 vs. Chapter 13 relief.
