A person who’s dealing with collection attempts in any form may realize that their finances aren’t going to support being able to pay for everything. Trying to determine where to go from there is sometimes difficult. Bankruptcy is the option that some people lean toward, but that comes with some questions.
One of the most pressing questions people have when they consider bankruptcy is what’s going to happen to their assets. The answer to this isn’t always easy.
How are assets handled?
Assets are placed into two distinct categories – exempt and nonexempt. The assets that are classified as exempt can’t be seized and liquidated by the bankruptcy trustee. The filer can keep these assets even if they file for bankruptcy. Exempt assets that still have payments due must be paid as required by the lender.
Any assets that are nonexempt can be seized and liquidated by the bankruptcy trustee. The proceeds are used to pay off the filer’s debts. This is done at the trustee’s discretion. If the assets aren’t valuable enough to make a sizeable dent in the debt balances, the trustee may bypass seizing the assets because the cost of seizing and liquidating may not be worth it.
What assets are exempt?
Which assets are exempt in a Texas bankruptcy depends on whether the filer opts to file using state or federal exemptions. Some exemptions include:
- Home equity: Texas has an unlimited homestead exemption for less than 10 acres of land in the city or 100 acres in the country. The federal exemption only applies to $25,150 worth of equity.
- Personal property: Texas allows up to $50,000 worth of personal property exemptions, but federal law only allows up to $25,000.
- Motor vehicles: Texas offers an unlimited motor vehicle exemption with one vehicle per licensed driver in the household. The federal exemption is $4,000 worth of equity for all vehicles in the household.
Other exemptions, such as those for retirement accounts and wildcard exemptions, may also apply. It’s also worth noting that all Texas exemptions are doubled for a married couple who’s filing bankruptcy together.
Determining which set of exemptions is best for a specific case may require the assistance of someone who’s familiar with both sets. There are also other factors that filers should consider before filing their bankruptcy.