What Can I Keep if I File Bankruptcy?

 Posted on November 21, 2024 in Asset Protection

Bankruptcy is a tool that helps people escape overwhelming debt, but that does not mean creditors are not entitled to repayment. When someone files Chapter 7 bankruptcy, the debtor’s assets are liquidated to pay creditors. Many borrowers who are considering bankruptcy assume all their assets are subject to liquidation, but this is not the case.

Texas law offers exemptions for certain assets, which means a bankruptcy filer is entitled to keep some possessions. For more details and to discuss your bankruptcy needs, reach out to a qualified Texas bankruptcy attorney.

What Is the Asset Exemption Law in Texas?

Texas is known for its generous asset exemption laws that allow bankruptcy filers to maintain a certain standard of living even as their possessions are liquidated. Filers can keep specific essential assets up to a defined value with the following exemptions:

• Personal property exemption: Filers can keep their home furniture, clothing, food, health equipment, pets and animals, family heirlooms, health savings accounts, burial plots, up to two firearms, sporting equipment, farming tools, religious items, and jewelry. The personal property exemption is limited to $100,000 for families and $50,000 for single adults, which means anything above that amount is eligible for liquidation. Jewelry is capped at 25 percent of the exemption.

• Homestead exemption: Texas property law allows filers an unlimited exemption on their home equity up to 10 acres in urban areas and up to 100 acres in rural ones. The cap may be increased to 200 acres for families. If a house is sold, the proceeds are exempt for six months.

• Vehicle exemption: Texas grants a full exemption for one vehicle for every member of the household who has a driver’s license.

• Retirement account exemption: Most pensions and retirement accounts are exempt from liquidation during bankruptcy. These include 401(K)s, 403(b)s, SEP IRAs, SIMPLE IRAs, and Roth IRAs up to $1,512,350 per person.

Federal law offers its own exemptions, which are less than Texas’ exemptions in some areas. Bankruptcy filers can choose either, but not both.

Do Asset Exemptions Apply to All Types of Bankruptcy?

Asset exemptions apply to Chapter 7 bankruptcy because it involves liquidating the debtor’s assets. Chapter 13, on the other hand, does not entail liquidation. Instead, it involves the filer working out a repayment plan to pay his or her debts to creditors over three to five years. The repayment plan is based on your income and how much you owe. Personal property exemptions can help lower your disposable income which in turn can lower the monthly repayments.

Contact a Schertz, TX Bankruptcy Attorney

Knowing which of your assets are exempt from liquidation is a crucial part of filing bankruptcy. Make sure you are as informed and protected as possible by consulting a San Antonio, TX bankruptcy lawyer. At the Law Offices of Chance M. McGhee, we are dedicated to providing top-tier legal services to help you navigate the bankruptcy process successfully. Get a free consultation today by calling 210-342-3400 now.