7 Little-Known Assets You Can Keep When Filing for Bankruptcy in Texas
Understanding Bankruptcy and Texas Exemptions
When filing for bankruptcy, you typically have two primary options to choose from:
- Chapter 7 Bankruptcy: Liquidates nonexempt assets to pay creditors and discharges most unsecured debts.
- Chapter 13 bankruptcy: Creates a repayment plan to pay off debts over 3-5 years, often allowing you to keep all your property.
One of the important aspects in bankruptcy is the ability to claim exemptions. These specify what you can keep and which you will be allowed to retain. Though the bankruptcy law in Texas allows choosing between state or federal exemptions, most debtors in Texas choose their state’s exemptions for their comprehensiveness and generosity.
1. Homestead Property—Beyond Traditional Homes
Probably the most famous of the protections in Texas bankruptcy law is that of the homestead exemption, which offers more protection than many people realize. While most people know the rule that this exemption protects a primary residence, it is much broader and also includes nontraditional homes: mobile homes, modular homes, or even land purchased for a future home.
This exemption in urban areas is for properties up to 10 acres and in rural areas, up to 100 acres for individuals or 200 acres for families. Allowing such a generous exemption assures that you have a place to call home, even when your living situation may be a little unconventional.
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2. Personal Property—Sentimental and Practical Items
Texas law lets people exempt as much as $50,000 worth of personal property ($100,000 for families). That includes things like clothing, household furniture, food, and even some heirlooms.
One category that is often overlooked in this exemption is jewelry and collectibles. For example, items such as family heirlooms, like antique jewelry or inherited furniture, are usually saved if they fall within the limits of exemptions. This protection makes sure that items with sentimental and practical value are not lost during bankruptcy.
3. Other Types of Cash and Financial Instruments
Although cash and financial instruments are not generally exempt in bankruptcy, Texas law does provide some important exceptions. Protected cash includes:
- Social Security benefits
- Unemployment benefits
- Child support payments
- Workers’ compensation benefits
Plus, tax returns containing earned income tax credits or child tax credits may be exempt. This way you may be able to preserve cash that is crucial for feeding your family while in a bankruptcy case and afterward, too.
4. Retirement Accounts and Pensions
One of the most protected exemptions under both state and federal law is for retirement accounts. These include:
- 401(k) plans
- Traditional and Roth IRAs (up to a certain limit)
- Employer pensions
Most of these accounts are exempt, so you know your financial future is still safe. Whether it is an employer-sponsored retirement plan or a private account, you need not worry about losing these assets in bankruptcy.
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5. Vehicles for Necessary Use
Vehicles are usually a source of concern for individuals filing bankruptcy, but Texas law is very generous with exemptions. You can exempt one vehicle per licensed household member if it’s necessary for work, school, or daily activities.
For example, a family with two licensed drivers and four members may be able to keep two vehicles as long as their value doesn’t exceed the exemption limits. Even if your vehicle’s value is higher than that allowed by an exemption, you may be able to negotiate a payment plan with Chapter 13 or give up the difference in its value to keep it.
6. Tools of Trade or Business Equipment
If you rely on specific tools or equipment to earn a living, Texas law lets you keep those. It can be:
- Farm equipment
- Professional tools
- Office supplies
For example, a hairstylist might keep salon chairs and styling tools, while a carpenter can keep saws and drills. This exemption recognizes the importance of preserving your ability to work and maintain an income.
7. Specific Policies of Insurance and Proceeds
Texas law also exempts the following types of insurance policies and their proceeds:
- Life insurance policies with a qualifying beneficiary
- Disability benefits
- Health savings accounts (HSAs)
- Annuities
Those protections mean that you and your family will have a financial safety net when things get tough. For example, if you have a life insurance policy with your spouse or child as the beneficiary, it may be entirely exempt.
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How to Maximize Your Exemptions
Bankruptcy exemptions can be tricky to navigate, but proper planning and professional help can go a long way in protecting your assets. Here are some tips on how to maximize your exemptions:
- Talk to a Texas bankruptcy lawyer. A lawyer can guide you through the details of Texas exemptions and how to apply them in your case.
- Accurately List Your Assets: Keep a detailed list of your property to avoid unnecessary complication or loss of assets.
- Choose the Right Exemption System: If federal exemptions better suit you, your lawyer can guide you in opting for them.
- Accurately Value Your Stuff: Misevaluation of properties leads to problems; acquire professional appraisals where necessary.
Conclusion
Filing for bankruptcy in Texas doesn’t have to mean losing everything. Due to the very generous exemptions in this state, you might be able to keep basic and even unexpected assets like your home, cars, personal property, retirement accounts, and more. Now, with the help of a well-informed attorney, you can find a financial fresh start without losing everything.
If you stand at the crossroads considering bankruptcy, speak with an experienced Texas bankruptcy lawyer about your choices. They will be able to guide you through the entire process, asserting the bankruptcy exemptions that are afforded to you and making sure that your assets remain well protected.
Contact Pack Law today and take the first step toward financial freedom!
Monitoring your credit reports regularly helps you catch these errors early so they don’t do long term damage to your credit score. It also lets you track your progress as you rebuild your credit.
The three major credit bureaus – Equifax, Experian and TransUnion – are required by law to give you a free credit report once a year. Review these reports carefully to make sure the debts discharged through bankruptcy are reported correctly. Any errors should be disputed immediately as they can harm your credit score and delay your progress.