Filing for bankruptcy can be a stressful and emotional experience, especially when it comes to wondering whether you will be able to keep your property and belongings. “Can I keep my stuff in a Chapter 7 bankruptcy?” is one of the most common questions when considering a bankruptcy proceeding. To understand the answer, it is important to understand the difference between exempt and non-exempt property under Texas bankruptcy law.

Understanding exempt and non-exempt property in Texas

When you file for Chapter 7 bankruptcy, a trustee is appointed to your case to liquidate your non-exempt assets to pay off your creditors. However, you do not have to lose everything – and often, you will not lose anything. Texas, like every other state, allows debtors to protect certain types of property using bankruptcy exemptions. The key is understanding what property is classified as “exempt” and what is “non-exempt.”

Exempt property is the property that you can keep even after filing for Chapter 7 bankruptcy. Texas is known for having some of the most generous bankruptcy exemptions in the United States, which allows many people to retain most, if not all, of their assets. The exemptions in Texas cover a wide range of personal property, ensuring you can maintain a basic standard of living even after your debts are discharged.

Non-exempt property includes assets that are not protected under Texas law and can be seized by the bankruptcy trustee to pay your creditors. The trustee will sell these assets, and the proceeds will be distributed among your creditors.

Exempt property in Texas

Texas offers two sets of exemptions for bankruptcy filers: the federal exemptions and the Texas state exemptions. You have to choose one set; you cannot mix and match between the two. Most Texans opt for the state exemptions because they tend to be more favorable. Here is a breakdown of the types of property that are typically exempt under Texas law:

  1. Homestead: Texas has an unlimited homestead exemption, which means you can protect the full value of your primary residence, regardless of its worth or size, as long as it is on 10 acres or less in an urban area or 100 acres or less in a rural area (200 acres for a family).
  2. Personal Property: Texas law allows individuals to exempt up to $50,000 worth of personal property (or $100,000 for a family). This can include:
    • Home furnishings, including furniture and appliances
    • Clothing and food
    • Tools, equipment, books, and supplies used in a profession or trade
    • Jewelry up to a certain value (usually up to $12,500 for an individual or $25,000 for a family)
    • Two firearms
    • Athletic and sporting equipment, including bicycles
    • Household pets
  3. Motor Vehicle: You are entitled to keep one motor vehicle per licensed household member, provided it is reasonably necessary for transportation.
  4. Retirement Accounts: Most tax-exempt retirement accounts, including 401(k)s, IRAs, and pensions, are fully protected under Texas law.
  5. Insurance Benefits: Life, health, and accident insurance benefits, as well as annuity contracts, are often exempt.
  6. Wages: Wages for personal services, except for court-ordered child support payments, are generally exempt.
  7. Health Aids: Professionally prescribed health aids are also exempt.

Non-exempt property in Texas

While the list of exempt property is extensive, there are still some assets that may not be protected in a Chapter 7 bankruptcy. Non-exempt property may include:

  1. Cash, Savings, and Investments: Cash, stocks, bonds, and other investments that do not fall under retirement exemptions are considered non-exempt.
  2. Luxury Items: Any luxury items not necessary for living, such as valuable art collections, rare coins, or collectibles, may be considered non-exempt.
  3. Additional Vehicles: Any additional vehicles beyond the one allowed per licensed household member are typically considered non-exempt.
  4. Property Exceeding Exemption Limits: If the value of your personal property exceeds the exemption limits, the excess portion may be considered non-exempt.
  5. Vacation Homes or Second Properties: Secondary properties, such as vacation homes or rental properties, do not qualify for the homestead exemption and are usually non-exempt.

What happens to non-exempt property?

If you have non-exempt property, the bankruptcy trustee may seize and sell those assets to pay off your creditors. However, this process is not as straightforward as it seems. Often, debtors can negotiate with the trustee to pay the value of the non-exempt property to retain it, or the trustee may decide not to pursue the asset if it’s not valuable enough to cover the cost of selling it.

How can you protect your property?

Navigating through the maze of exempt and non-exempt property can be confusing. Understanding the value of your assets and knowing what is protected under Texas law is crucial to make sure you are maximizing your exemptions. An experienced bankruptcy attorney can help you evaluate your situation and ensure that you are taking full advantage of the exemptions available to you.

Rubin & Associates is here to help

Filing for Chapter 7 bankruptcy can feel overwhelming, but you don’t have to go through it alone. At Rubin & Associates, we specialize in helping DFW residents navigate the complexities of bankruptcy law. We understand the fear of losing your belongings and are committed to helping you protect what matters most. With our guidance, you can make informed decisions and move toward a brighter financial future. Call us today at 214-760-7777 for a free consultation and let us help make the bankruptcy process as straightforward and stress-free as possible. We are here to answer your questions, protect your assets, and give you peace of mind.