Understanding Texas Bankruptcy Exemptions

“Will I lose it all?” is one of the first questions individuals ask when considering filing for bankruptcy. However, bankruptcy laws allow for protection of certain types and amounts of the debtor’s property.

Choosing Federal Or Texas Bankruptcy Exemptions

Each state handles bankruptcy exemptions differently. Some states allow debtors to choose between using the federal bankruptcy exemptions or the state’s exemptions.

Other states only allow debtors to use that specific state’s exemption. Texas allows debtors to chose between either the federal or state exemptions.

The key is, however, once the debtor chooses one set of exemptions, he or she cannot pick and choose to use exemptions from the other list.

The State of Texas is fairly generous in the exemptions available per state law, so many debtors filing for bankruptcy in Texas choose to utilize what the state has to offer.

Exemptions For Married Couples

If a married couple is filing a joint bankruptcy, each spouse is entitled to claim the exemption for any property that is owned jointly. By doing this, couples filing bankruptcy are able to double the exemption amount available.

The Homestead Exemption

Texas has an unlimited amount of homestead exemptions for a residence on 10 acres of land or less in a city, village or town, or the exemption could be used for a home on 100 acres or less in the country, 200 acres for families.

If the debtor sells his or her house, the proceeds of the sale are protected for six months after the sale, as well.

Motor Vehicle Exemption

Under Texas law, the debtor is allowed to exempt the entire value of one motor vehicle per licensed household member. A vehicle can also be exempted if the household member does not have a license but relies on someone to drive the vehicle for him or her.

Personal Property Exemptions

Personal property can also be exempt under Texas bankruptcy law. The amount of personal property cannot be more than $100,000 per family or $50,000 for a single adult with no family. Anything above that amount would be considered nonexempt.

Personal property can include the following:

• Up to two firearms;
• Sporting or athletic equipment;
• Sacred religious books, including Bibles;
• Home furnishings, including family heirlooms;
• Jewelry can be exempt, so long as it does not go over 25 percent of the total exemption amount;
• Pets and domestic animals;
• Food;
• Clothing;
• Money in a health savings account;
• Health aids; or
• Burial plots.

Retirement Accounts Or Pensions

Tax-exempt pensions and retirement accounts are considered exempt on both the state and federal exemption list. Texas also has a specific list of retirement accounts that are exempt, including the following:

• Retirement accounts and pensions for Judges
• Pension and retirement accounts for county and district employees
• Law enforcement and firefighter retirement or pension accounts;
• ERISA-qualified benefits for government or church employees;
• Survivor benefits for law enforcement officer, firefighters or emergency medical personnel;
• Police officer retirement benefits or pension accounts;
• Government employees, elected officers, and state employees’ pension or retirement benefits;
• Teacher retirement or pension benefits; and
• Tax-deferred retirement benefits.

Insurance Exemptions

In addition, certain insurance benefits are also exempt, especially if these benefits fall under one of the following categories below:

• Fraternal benefit society, such as the Elks, Freemasons or Knights of the Columbus, insurance benefits;
• Benefits received from life, health, accident insurance or annuities, including money or policy proceeds due or paid to an insurance beneficiary or to the insured directly;
• Texas employee uniform group insurance benefits;
• Group insurance for Texas employees;
• Group insurance for Texas public school employees;
• Employee benefits for employees of a Texas state college or university;

What Is Not Exempt?

Under Texas exemption laws, proceeds received by the debtor from a lawsuit are not considered exempt. Further, unlike other states, Texas does not offer a wildcard.

These types of exemptions are available in some states to protect any property that was not previously considered exempt. Texas does not offer this added protection.

If the debtor considers this needed in his or her case, that person may consider using the federal exemptions instead, as the wildcard exemption is available per federal bankruptcy law.

It is encouraged that the debtor talks with a bankruptcy attorney to see if this is necessary.

Contact Collins & Arnove Today

Facing a bankruptcy can be a complicated process. We are here to walk you through it every step of the way. If you need assistance, the attorneys at Collins & Arnove can help you. To learn more and to schedule your free consultation, call (972) 544-4540 today.

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