Texas Banktrupty Exemptions

1. Texas Bankruptcy Exemptions • A Basic Guide

2. Bankruptcy Misconceptions

3. In 2012 there were 1.2 million bankruptcy petitions filed across the United States.

4. People who could benefit frombankruptcy are often hesitant to pursue that option because of misconceptions.

5. For example, people often believe they will lose their home, vehicle, or wages • IF THEY FILE BANKRUPTCY.

6. In reality, most people who file bankruptcy in Texas don’t lose any assets because of the GENEROUS TEXAS AND FEDERAL BANKRUPTCY EXEMPTIONS.

7. Choosing a Chapter

8. Individuals can file chapter 7, 11, 12, or 13 bankruptcy cases.

9. Chapter 11 is usually used by small Businesses, but can be used by individuals with large or complicated financial matters. a

10. Chapter 12 is filed by family farmers and fishermen to reorganize their businesses. b

11. Chapter 13 is filed by individuals who elect to have their wages garnished for 3 to 5 years to repay their creditors. c

12. Most individuals can and should to file choose a chapter 7 bankruptcy case.

13. Chapter 7 – The Quickest Way to A Fresh Start

14. For almost all individuals filing bankruptcy in Texas, the bankruptcy and federal exemptions protect most, if not all, of their assets while allowing them to be discharged from virtually all of their debts.

15. Who Has Jurisdiction Over • Bankruptcy Cases?

16. Bankruptcy is federal law, meaning that the federal courts have jurisdiction over bankruptcy proceedings in the U.S.

17. Although bankruptcy is federal law, each state determines the exemptions debtors may use when filing bankruptcy.

18. Determining Exemptions A debtor can use the state’s exemptions if he or she lived in that state for the two years before the bankruptcy case is filed.

19. If you lived in Texas for the two years prior to the filing of your bankruptcy case, you can use either the state or federal exemptions – both allow most debtors to keep virtually all of their assets.

20. What is an Exemption? Think of an exemption as a way to legally protect an asset from seizure by the bankruptcy trustee for the purpose of satisfying creditor claims.

21. An exempt asset is an asset you can keep when you file a bankruptcy case.

22. Federal vs. State Exemptions The U.S. Bankruptcy Code provides a list of federal exemptions. Individual states are also allowed to create their own list of exemptions.

23. Furthermore, each state determines if a debtor must use the state’s exemptions or has the option to choose the federal exemptions instead.

24. Texas allows a debtor to use either the federal or state exemptions BUT NOT BOTH

25. A married debtor filing a joint petition may double many of the exemptions, EITHER FEDERAL OR STATE.

26. Texas Exemptions Texas has some of the most liberal exemptions of all the states.

27. A few commonly used exemptions include: • Homestead – Texas has an unlimited homestead exemption that allows a debtor to exempt a residence and up to 10 acres if the debtor lives in the city or a residence and up to 100 to 200 acres if the debtor lives in the country. Vehicle – full value of one motor vehicle per licensed household member. If a household member is unlicensed, you may still be able to exempt a vehicle for that individual if he or she relies on someone else to operate the vehicle for the individual. Additional vehicles allowed if used in trade or business. • Livestock – pets, two horses/mules/donkeys plus tack, 12 head of cattle, 60 head of other livestock, 120 fowl.

28. Personal Property – up to $60,000 if you have a family; $30,000 if you are single without a family Retirement/Pensions – federal law exempts most tax-exempt pension and retirement accounts even if you elect to use the Texas exemptions. Texas law also exempts other accounts • Insurance Benefits – all life, health and accident benefits are exempt

29. Federal Exemptions

30. Homestead – up to $22,975 in equity in your home • (doubled if married plus wildcard) 1 2 • Vehicle – up to $3,675 in equity in one motor vehicle • Personal Property – household good up to an aggregate value of $12,250 but no more than $575 for any one item 3 4 • Retirement Accounts – all tax-exempt retirement accounts up to a cap of $1,245,475 on IRAs and Roth IRAs 5 Wildcard -- $1,225 plus up to $11,500 of the unused portion of your homestead exemption for any other property

31. Exemptions and Secured Debt An exemption will protect your property from being sold to repay creditors but you still have to pay the purchase money lender who financed the purchase of your car or home if you want to keep that asset.

32. For instance: • Your home’s current market value is $200,000 and you owe $100,000 on the loan.

33. For instance: • Your home’s current market value is $200,000 and you owe $100,000 on the loan. • The Texas homestead exemption will protect the $100,000 of equity you have in the home.

34. For instance: • Your home’s current market value is $200,000 and you owe $100,000 on the loan. • The Texas homestead exemption will protect the $100,000 of equity you have in the home. • However, if you want to keep your home, you must still pay the purchase money lender. Claiming the home as exempt does not remove the purchase money lender’s lien on your home.

35. Want to Know More About Bankruptcy Exemptions in Texas?

36. Get Your Bankruptcy Exemptions Answered Click to visit: centraltexasbankruptcy.com Content provided by Best Legal Practices