If you are filing for Chapter 7 or Chapter 13 bankruptcy in Texas, the Texas bankruptcy exemptions can help you keep property (in Chapter 7) or pay less to unsecured creditors (in Chapter 13). Read on to learn the types of property that are covered by the Texas exemption laws.
What Are Bankruptcy Exemptions?When you file bankruptcy, an estate is created that is comprised of everything you own at the time you file bankruptcy, as well as anything to which you are entitled (such as a tax refund you haven't received yet). In a Chapter 7 case, the trustee can sell all estate property to repay your creditors; in a Chapter 13 case, you must pay into your plan at least what your creditors would have received in a Chapter 7. Fortunately, you can use exemptions to take property out of the bankruptcy estate, protecting your assets and reducing the amount you must pay in Chapter 13. (To learn more about bankruptcy exemptions, see the Bankruptcy Exemptions topic.)
Federal v. Texas Bankruptcy ExemptionsFederal bankruptcy law provides a long list of property you can exempt up to a certain dollar amount of value. (See Federal Bankruptcy Exemptions for more information.) All states also have their own exemption laws. In Texas, you can elect to use either the federal exemptions listed in the Bankruptcy Code or the exemptions listed under Texas state laws. You cannot use both Texas law and federal law to exempt your property; you must choose one (although there are certain federal exemptions that always apply, regardless of which scheme you choose).
Doubling Exemptions for Married CouplesIf you are a married couple filing bankruptcy jointly, you are each entitled to your own separate exemptions, thus allowing you to double your exemption amount for property you own jointly.
The Texas Homestead ExemptionTexas offers an unlimited homestead exemption for a residence on 10 acres or less in a city, town or village or 100 acres or less in the country (this doubles to 200 for families). If you sell your house, the proceeds are exempt for 6 months after the sale under this exemption. (Tex. Prop. Code Ann. 41.001, 41.002 and 41.003. See also the Texas Constitution, Article 16, Sections 50 and 51.) (For more information about the Texas homestead exemption, see The Texas Homestead Exemption.)
The Texas Motor Vehicle Exemption
The Texas motor vehicle exemption is also generous; the law allows you to exempt the entire value of one motor vehicle per licensed household member. If you have a household member who does not have a license, you can still exempt that vehicle if the unlicensed person relies on someone else to operate the vehicle. Tex. Prop. Code Ann. 41.002(a)(9).
(For more information about the Texas motor vehicle exemption, The Texas Motor Vehicle Exemption in Bankruptcy.)
Texas Personal Property Exemptions
Texas provides the following exemptions for personal property (property that is not real estate). As of 2012, the property you exempt under any of these items cannot exceed a total of $60,000; $30,000 if you are a single adult without a family. For example, if all your personal property is worth $75,000, you can only exempt $60,000 of it. The remaining $15,000 will be nonexempt (all citations are to the Tex. Prop. Code Ann.):
- Up to two (2) firearms. § 42.002 (a)(7).
- Athletic and sporting equipment, including bicycles. § 42.002 (a)(8).
- Bibles or other books containing sacred religious writings. § 42.001 (b)(4).
- Home furnishings including family heirlooms. § 42.002 (a)(1).
- Jewelry (limited to 25% of total exemption - so as of 2012, jewelry can be exempted up to $15,000). § 42.002 (a)(6).
- Animals, including:
- pets and domestic animals plus their food
- 2 horses, mules, or donkeys, plus tack
- 12 head of cattle
- 60 head of other livestock, or
- 120 fowl. § 42.002 (a)(10),(11).
- Clothing and food. § 42.002 (a)(2),(5).
- Health savings accounts. § 42.0021.
Burial plots (§ 41.001) and health aids such as wheelchairs, canes and hearing aids (§ 42.001 (b)(2)).
Pensions and Retirement Accounts
Under the bankruptcy law, most tax-exempt pensions and retirement accounts are exempt, even if you choose the Texas exemptions instead of the federal exemptions. These pensions and accounts include certain pensions or retirement funds that receive special tax exemptions under certain sections of the U.S. Tax Code. You can check with your fund to find out if it qualifies as tax exempt.
Additionally, Texas provides that the following pensions and retirement accounts are exempt under Texas law:
- County and district employee retirement and pension benefits. Tex. Gov’t. Code Ann. § 811.006.
- ERISA-qualified government or church benefits, including Keoghs and IRAs; (except for Roth IRAs, IRAs limited to tax-deductible contributions). Tex. Prop. Code Ann. § 42.0021.
- Firefighter retirement and pension benefits. Tex. Civ. Stat. Ann. Art. 6243e.1 (1.04), Tex. Civ. Stat. Ann. Art. 6243e (5), Tex. Civ. Stat. Ann. Art. 6243b (15), Tex. Civ. Stat. Ann. Art. 6243a-1 (8.03), Tex. Civ. Stat. Ann. Art. 6243e (5).
- Judges' retirement and pension benefits. Tex. Gov’t. Code Ann. § 831.004.
- Law enforcement officers, firefighters, emergency medical personnel survivors benefits. Tex. Gov’t. Code Ann. § 615.005.
- Municipal employees, elected officials and state employees' pension and retirement benefits. Tex. Gov’t. Code Ann. § 811.005, Tex. Civ. Stat. Ann. Art. 6243h (22).
- Police officer pension and retirement benefits. Tex. Civ. Stat. Ann. Art. 6243d-1 (17), Tex. Civ. Stat. Ann. Art. 6243b (15), Tex. Civ. Stat. Ann. Art. 6243a-1 (8.03), Tex. Civ. Stat. Ann. Art. 6243j (20).
- Retirement benefits to the extent they are tax-deferred. Tex. Prop. Code Ann. § 42.0021.
- Teacher retirement and pension benefits. Tex. Gov’t. Code Ann. § 821.005.
- Fraternal benefit society benefits (such as those provided by the Freemasons, the Knights of Columbus and the Elks). Tex. Ins. Code Ann. § 885.316.
- Life, health, accident, or annuity benefits, including any money, policy proceeds or cash value due to or paid to beneficiary or insured. Tex. Ins. Code Ann. § 1108.051.
- Texas employee uniform group insurance. Tex. Ins. Code Ann. § 1551.011.
- Texas public school employees' group insurance. Tex. Ins. Code Ann. § 1575.006.
- Texas state college or university employee benefits. Tex. Ins. Code Ann. § 1601.008.
This is not an exhaustive list of exemptions available in Texas, and the amounts shown here are correct as of June 2012. Because exemption amounts change periodically and you may have property not described in this article, you should always review the Texas laws to confirm. To find out more about researching statutes, visit the Legal Research Center.