4 Important Facts About Chapter 7 Bankruptcy Exemptions In Texas
When you file for chapter 7 bankruptcy, a trustee will sell off your assets to raise money that you must use to pay off your creditors. When reviewing your assets, certain types of property are exempt, which means that you can keep them once the process finishes. For many people, the exemptions in Texas are perhaps more generous than you might expect. Here are four important examples.
The family's cars are exempt
Texas bankruptcy law states that the value of the equity you hold in a car is exempt from the chapter 7 process. What's more, you can exempt one motor vehicle for every adult family member who holds a driving license. As such, if you, your wife or husband and your children all have their own cars, you won't need to sell the vehicles to pay off your creditors. This rule applies to motorcycles, cars and SUVs.
However, the exemption is not unlimited. In Texas, there is an overall limit on exempt personal (non-real estate) property of $100,000 for a family. If the combined value of the equity held in your family's vehicles exceeds this limit, you would have to sell one or more of the cars.
Equity in the family home is exempt
The chapter 7 bankruptcy process is attractive to some debtors because the value of the equity held in the family homestead falls within the exemption rules. As such, as part of writing off your debts, you may not need to surrender your family's home.
It's important to get expert advice about this exemption, as the rules are strict. First, the exemption only applies to the equity in the home, not the total value. As such, if your home is worth $200,000 and you still owe $100,000, only the other $100,000 is exempt. For many people, selling the homestead is still necessary. What's more, only homes of a certain size are exempt. In a city or town, the total plot cannot exceed 10 acres.
You can keep the value of home improvements and additions
The homestead exemption in Texas also applies to certain home improvements. Provided the value of the improvement remains within the equity you own, you can include home improvements in your homestead exemption.
Examples include swimming pools, roads and barns. In fact, even a family burial plot falls within the homestead exemption. However, remember that the exemption only applies to your primary residence, so you need to show that you don't own multiple properties. If you decide to rent out a primary residence (for example, to go and live with family members for a period), the rented home remains exempt.
Pets and domestic animals are exempt (within limits)
Families may sometimes worry that chapter 7 bankruptcy laws will force them to get rid of their animals, but the exemptions allow most people to keep pets and a small number of livestock.
In fact, the rules would allow for a surprisingly generous number of animals. First, there are no limits on pets and their food, so you could keep as many cats and dogs as you like. You could also hold on to two horses, as well as 12 head of cattle. You could even keep 60 head of other livestock or up to 120 fowl.
These rules allow families who rely on their animals for food to continue to live in this way. What's more, small numbers of livestock don't raise significant sums of cash, so creditors won't normally see the value in seizing a few sheep or cows.
Chapter 7 bankruptcy law in Texas allows a significant number of exemptions. Talk to an experienced chapter 7 bankruptcy attorney, such as those at LeBaron & Jensen, P.C., for more advice.