File Bankruptcy and Keep Your House

The Bankruptcy Code provides those in debt with an opportunity to start over, getting rid of unsecured debts and keeping creditors at bay. While filing for bankruptcy may seem scary, in most cases you will not even have to set foot in a bankruptcy court in Texas. Generally, there are two types of consumer bankruptcy cases: chapter 7 and chapter 13. A chapter 7 case involves liquidating a debtor’s assets in order to repay creditors. A chapter 13 involves using a debtor’s wages to pay back debts.

In both chapter 7 and 13 cases, a debtor can exempt certain property under the Bankruptcy Code. An exemption allows an individual to protect a certain amount of equity in real or personal property from creditors attempting to collect on debts. The bankruptcy code allows debtors to use exemptions provided by Texas state law. In Texas homestead exemptions (your home) are very broad. In cities, an individual may protect an unlimited amount of equity in real property that is 10 acres or less. In rural areas, an individual may protect an unlimited amount of equity in real property that is 100 acres or less. What this means is if the value of your home (10 acres or less in the city and 100 acres or less outside the city) is more than any mortgage on the home, you will not be forced to sell to pay off creditors. Additionally, as long as you continue to pay any mortgage on the home, the bank cannot foreclose on your home.

Texas law is especially generous when it comes to exempting any in cars and trucks, allowing an individual to exempt the entire value of a vehicle for each licensed member of the household. Even if a household member is unlicensed, you can use their household membership to exempt a vehicle if that person depends on another person to operate the vehicle. Texas also offers exemptions for personal property, such as household furnishings, clothing, jewelry, guns, and even burial plots. The value of the property an individual may exempt depends on whether that person is the head of a household or without a family. A head of household may exempt up to $100,000 in personal property. A person without a family may exempt up to $50,000 in personal property. For either, personal property that may be exempted includes up to two guns, furniture, books, animals, food and clothing, athletic and sporting equipment, and health aids, such as wheelchairs or hearing aids.

Debtors in bankruptcy are also able to exempt interests in individual retirement accounts under Texas law. Individual retirement accounts include most tax-exempt retirement accounts, such as state and local government pensions and other self-funded tax-exempt accounts. An experienced bankruptcy attorney can assist you in filling out all the bankruptcy paperwork, file it, and represent you at a meeting before a bankruptcy trustee. In most cases, you will not be required to appear before the bankruptcy court and can have your unsecured debts discharged in as little as three months in a chapter 7.