Many people struggling financially may be eligible for a Chapter 7 bankruptcy. If they can pass a means test, they could potentially complete the Chapter 7 bankruptcy process in as little as a few months. Chapter 7 bankruptcy is also known as liquidation bankruptcy.
In some cases, those filing bankruptcy have to liquidate some of their resources before they qualify for a discharge of their debts. It is only natural for people to fear the prospect of losing property that is valuable to them. Particularly when homeowners find themselves considering bankruptcy, they may fear the potential loss of equity that could follow a bankruptcy filing.
The forced liquidation of equity could be devastating for those trying to take control of their finances. Thankfully, there are exemptions available that allow people to preserve certain assets so that they can rebuild after bankruptcy. What home equity protections do people pursuing Chapter 7 bankruptcy in Texas have?
There are two types of exemptions
There are bankruptcy exemptions available under federal law and also state exemptions as well. Texas allows filers to choose which set of exemptions to use in a Chapter 7 bankruptcy case.
If filers choose to use state exemptions, Texas allows them to protect property based on the acreage they own, rather than the value of the property. Those in urban areas can protect up to 10 acres and the improvements on the land. Those in rural areas can protect up to 100 acres under state homestead exemptions. Couples filing jointly can potentially protect up to 200 acres of land.
For those who choose to use the federal exemptions instead, the exemption relies on the value of equity, not the acreage owned. Single people can protect up to $31,575 in home equity, while married couples filing jointly can protect up to $63,150.
Cataloging personal resources and carefully evaluating both sets of exemptions can help people as they prepare for Chapter 7 bankruptcy. People can potentially protect most, if not all, of their valuable resources with exemptions. The right choices early in the filing process may make it easier for people to preserve resources and rebuild after the courts grant them a discharge.