What Assets Are Exempt From Liquidation in a Chapter 7 Bankruptcy?

 Posted on June 09, 2021 in Bankruptcy

Debt can be a difficult issue for anyone to deal with. Fortunately, bankruptcy can provide relief for those who find themselves unable to pay the debts they owe while also covering their ongoing expenses. In many cases, Chapter 7 bankruptcy is the preferable option, since it will allow most debts to be eliminated quickly and easily. This form of debt relief is referred to as a “liquidation bankruptcy” since the bankruptcy trustee may seize some of a debtor’s assets and sell them to pay off the debts owed to creditors. However, certain types of assets are exempt from liquidation. By understanding what exemptions apply to them, debtors can determine whether Chapter 7 bankruptcy is their best option or whether they should choose a Chapter 13 bankruptcy instead.

Bankruptcy Exemptions in Texas

Those who live in the state of Texas can take advantage of some of the most generous bankruptcy exemption laws in the United States, and if necessary, they can use the federal bankruptcy exemptions as an alternative. Homeowners can use the homestead exemption for the equity they own in their homes. In Texas, there are no limits on the amount of a homestead exemption that can be claimed, as long as the home is located on a property that falls within certain size limits. For urban homes located in a city or municipality, a lot can be no larger than 10 acres. For rural homes, a homestead may consist of up to 100 acres for a single person or 200 acres for a family. When filing for Chapter 7 bankruptcy, a homeowner may be able to avoid the foreclosure of their home if they make up any missed mortgage payments and will be able to continue making payments after completing the bankruptcy process. 

Texas’ exemption laws also cover the personal property owned by a debtor. A single person can exempt up to $50,000 of property, and a family can exempt up to $100,000. Personal property may include:

• Furniture

• Clothing

• Jewelry (up to 25% of the total amount of exempt property)

• Two firearms

• One motor vehicle for each person in a family who has a driver’s license

• Tools, equipment, and books used in a person’s profession

• Bicycles and other athletic equipment

• Livestock, including two horses or donkeys and a saddle and bridle for each animal, 12 head of cattle, 120 fowl, and/or 60 head of other animals.

• Pets

In addition to the personal property exemptions, retirement savings and benefits are generally exempt. These include employer-sponsored retirement plans such as a 401(k), pension benefits, individual retirement accounts (IRAs), health savings accounts, and college savings accounts.

Contact a New Braunfels Chapter 7 Bankruptcy Attorney

To file for Chapter 7 bankruptcy, you will need to pass a means test and meet other requirements. At the Law Offices of Chance M. McGhee, we can advise you of your best options for debt relief, and we will help you prepare all of the necessary documents and complete the required steps during the bankruptcy process. Contact our Kerrville, TX bankruptcy lawyer at 210-342-3400 to schedule your free consultation today.

Sources:

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.41.htm

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.42.htm