What exemptions does Texas have for Chapter 7 bankruptcy?

On Behalf of | Apr 18, 2024 | Chapter 7

Realizing that you need to file for bankruptcy to get control of your finances can be an intimidating process. One of the first things you’ll have to determine is what type of bankruptcy you’ll file. Chapter 7 bankruptcy, which, is known as a liquidation bankruptcy, is one option.

In a Chapter 7 bankruptcy, the trustee assigned to your case has the option of liquidating non-exempt assets to pay off your debts. Thankfully, there are many exemptions that are allowed in Texas. Those exemptions are assets that the trustee can’t touch.

What assets are exempt?

Texas allows bankruptcy filers to choose between state and federal exemptions. This isn’t always a clear-cut decision, so it may behoove you to speak to your legal representative about which is best for your case.

If you choose the state option, know that the homestead exemption is unlimited under Texas exemptions as long as a person has lived in the state for at least 1,215 days. The state exemption includes up to 10 acres in the city or less than 100 acres in the country. It also includes improvements made to the property. The federal exemption is only $25,150 in equity for any home.

The personal property exemption in Texas is around $50,000, but the federal exemption is only around $25,000. This includes things like furniture, clothing, jewelry and firearms.

Retirement plans in Texas are fully exempt from bankruptcy proceedings. Under federal exemptions, these may be limited to $1.3 million, but a Supreme Court ruling in 2014 implied that retirement accounts were actually unlimited under federal exemptions.

Motor vehicles have an unlimited exemption under Texas exemptions. The federal exemption is $4,000. This is based on the equity that’s available in the vehicle.

Even if you have non-exempt assets, liquidating them must be worth the time and effort of the trustee. In most cases, a person who passes the means test to file for Chapter 7 bankruptcy won’t have assets that are worth trying to liquidate. Working with a legal representative who can help you to learn about your rights and responsibilities, and whether any of your property will truly be at risk if you file for bankruptcy.