What property can you keep if you file bankruptcy in Texas?
One of the key issues in filing bankruptcy is determining what constitutes "exempt" property. If you have resided in Texas for the two years before filing bankruptcy, you are allowed to keep exempt property without having to pay back your unsecured creditors the value of the exempt property. If you file bankruptcy in Texas, you can choose the exemptions in the laws of Texas or you can choose the federal exemptions. If you resided in another state for the two years before filing bankruptcy, our office will have to research the laws of that state before determining what exemptions apply to you.
Partial List of Exempt Property in Texas
Homestead Exemption Unlimited amount, but cannot exceed 10 acres in a city, town, or village, or 100 acres (200 acres for family) elsewhere. Sale proceeds are exempt for 6 months after sale. Homestead declaration must be filed. Personal Property Exemption Burial plots and health aids; books containing sacred writings of a religion (exempt from the $60,000 family/$30,000 single total personal property allowed). Home furnishings, including family heirlooms; food; clothing; jewelry up to 25% of the limit stated below: 2 firearms; athletic & sporting equipment (includes bicycles); 1 motor vehicle for each adult with drivers license or who relies on another to operate a vehicle; 2 horses, mules, or donkeys, with saddle, blanket & bridle for each; 12 head cattle; 60 head other livestock; 120 fowl; food on hand for these animals; and household pets. Total value of all items is limited and (including tools of trade and cash value of life insurance) cannot exceed $30,000 total ($60,000 for head of family). Funds in a health savings accounts. Wage Exemption Earned but unpaid wages; and unpaid commissions for personal services up to 25% of the limit stated above. Pension Exemption Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000 per person. This includes retirement savings in special programs for: teachers; judges; county and district employees; law enforcement officers, firefighters, and emergency medical personnel’s survivors; police officers; firefighters; state employees, elected officials, and municipal employees; and ERISA-qualified church or government benefits, including IRAs and Keoghs or any retirement benefits to extent tax-deferred. Public Benefit Exemption Unemployment compensation, workers compensation, crime victims' compensation, public assistance, medical assistance. Tools of Trade Exemption Tools, books, and equipment, including motor vehicles and boats used in trade or profession; and farming or ranching vehicles and implements. Tools of trade exemptions are included in the limit total listed under Personal property. Insurance Exemption Texas employee uniform group insurance, Texas public school employees group insurance, Texas state college or university employee benefits, fraternal benefit society benefits, life, Miscellaneous Exemptions Alimony and child support, higher education savings plan trust account, liquor license and permits, prepaid tuition plans
Partial List of the Federal exemptions
Homestead: You can currently protect $21,625 of equity in your home under the federal exemptions. Personal Property: $3,450 for your motor vehicle, $1,450 for jewelry, $11,525 aggregate value of household goods and furniture (no single item can exceed $550 in value), $2,175 tools of the trade. Wildcard exemption: Currently you are allowed $1,150 plus $10,825 of any unused portion of your homestead exemption to exempt any type of property. Retirement: Most retirement accounts, with a cap of $1,171,650 on IRAs and Roth IRAs.
Nonexempt property is any property that is not claimed exempt. If you file bankruptcy, you have to pay your unsecured creditors back the value of your nonexempt property.
Should you Choose the Federal or State Exemptions?
It depends on what property you own. Generally speaking if you do not have much equity in your home, you are usually better off choosing the federal exemptions because the federal exemptions provide for a "wildcard" exemption, which allows you to exempt bank accounts. The Texas exemptions, which are the most generous in the United States, do not allow you to claim cash or checking accounts as exempt property. If you have a large amount of equity in your home, you are usually better off choosing the Texas exemptions.
Your home is worth $2,000,000. Your mortgage is $80,000. You bought the property five years ago. You are not married. You own a car. It is worth $20,000. You owe $19,000 on the car. You want to keep the home and the car. Your furniture and clothes are worth $2,500.00. You have $1,000 in your checking account. You have $100,000 in your 401k. You have $100,000 in credit card debt. In this case, you would choose the Texas exemptions because you have $1,920,000 of equity in your home. If you qualify for chapter 7 bankruptcy, you can keep your home and continue to pay the $80,000 mortgage. You can keep the car and continue to make the regular car payment. You are allowed to keep all the 401k because it has an unlimited exemption. Although your car is worth $20,000, you have only $1,000 of equity in it, which you are allowed to keep. You can keep the clothes and furniture because they are worth less than $30,000.00. You have to give the bankruptcy trustee $1,000 in your checking account because Texas exemptions won't allow you to keep the money in the account. The trustee will use the $1,000 to pay your credit cards. The credit card companies will receive 1.0% of their balance. The rest of the debt will be wiped out in the bankruptcy. Example #2: Same facts as above except your house is worth $82,000. In this case, you have only $2,000 equity in your home so you would use the federal exemptions. The federal exemptions would allow you to keep the $2,000 equity in your home, the $1,000 equity in the car, the $1,000 in your checking account, and the $1,500 of clothes and furniture. Here you would get to keep all your assets and you would not have to pay your credit card companies anything.