Individuals and families facing financial hardship sometimes make the difficult decision to file for bankruptcy. Those with above-average income or particularly valuable assets may pursue a Chapter 13 bankruptcy. Chapter 13 proceedings require a multi-year repayment plan, but they allow people to retain all of their property.
Those with lower income who can pass a means test may pursue Chapter 7 bankruptcy instead. The Chapter 7 process is faster because there are no payments to creditors required. The trade-off is that some of their property could be at risk. Some people refer to Chapter 7 bankruptcy as liquidation bankruptcy.
This name comes from the requirement to liquidate or sell certain assets to repay creditors before the courts grant a discharge of the filer’s eligible debts. While most Texas Chapter 7 cases do not result in liquidation, some people do have to sell certain assets to complete the bankruptcy process. There are different exemptions available for certain types of property under Texas state law. Can a bankruptcy filer protect the vehicle that they use?
Texas has generous vehicle exemptions
People filing for bankruptcy in Texas can protect their homestead or primary residence. It can also protect quite a bit of their personal property. A vehicle falls into the personal property category. The law allows each member of the family to exempt one motor vehicle. There is no specific limit for the value of the vehicles exempted. However, the total amount of personal property that a filer exempts cannot exceed $50,000 for an individual or $100,000 for a filer with a family.
What about financed vehicles?
Circumstances can be a bit different when the filer does not outright own the vehicle they hope to protect. A financed vehicle is at risk of repossession rather than liquidation. Thankfully, the automatic stay that the courts grant the day someone files for bankruptcy can protect them from the repossession of their vehicle. A filer can potentially renegotiate their vehicle loan or reaffirm it to retain their financed vehicle during and after the bankruptcy process.
Individuals who learn about the different Chapter 7 bankruptcy exemptions can more effectively protect their assets during bankruptcy proceedings. Properly utilizing bankruptcy exemptions may make it easier to rebuild financially after bankruptcy.