If you are considering filing for bankruptcy, you may be hesitant, because you have heard that you lose your property. Although some property may be sold in Chapter 7 bankruptcy, most of your important property is protected by bankruptcy exemptions. The only type of property that may be sold is nonexempt property.

How exemptions work

The bankruptcy laws remove certain types of property from the bankruptcy estate, protecting it from being sold to pay debts. Both Texas and federal law has a list of exempt property. In Texas, you can choose which set of exemptions you would like to apply to your estate. If you are a homeowner, most opt for the Texas exemptions, because they are generally more generous.

One of the largest benefits under the Texas exemptions is the homestead exemption. This exemption allows those who file for bankruptcy to keep their primary residence and all property improvements, such as a swimming pool. Although there is no limit on the property value that may be exempted, the size of the property is limited to 10 acres in the city and 100 in the country.

The Texas homestead exemption allows homeowners to keep their residence throughout the Chapter 7 process, assuming that the mortgage is kept up to date. If the bankruptcy filer chooses Chapter 13 bankruptcy instead, the exemption keeps the value of the home from being considered when the court calculates how much payment is due each month under the repayment plan.

What else is exempt?

Under Texas law, bankruptcy filers also can exempt important personal property from their bankruptcy estates. The total value of property that may be exempted is limited to $60,000 for married couples and $30,000 for single adults, excluding any liens or encumbrances on the property. The main types of personal property that may be claimed as exempt, up to the limit, under the personal property exemption are:

  • Motor vehicles (one vehicle for every licensed driver)
  • Clothing
  • Furniture and family heirlooms
  • Tools and other work-related equipment
  • Up to $15,000 worth of jewelry
  • Athletic equipment, including bicycles
  • Pets

The personal property exemption is intended to help bankruptcy filers keep their most important possessions, as well as possessions needed to make a living, from being lost in the bankruptcy process.

Consult an attorney

As this is just a summary of the primary exemptions available to Texas filers, it is important to consult with an experienced bankruptcy attorney for more information. An attorney can advise you on the type of bankruptcy that would be right for your situation and would allow you to best protect your property.