One of the biggest myths about bankruptcy is that you will have to give up all of your assets. This is not true, thanks to bankruptcy exemption laws. These laws exempt or protect certain property during the bankruptcy process. In fact, when properly handled and executed, problems with protecting property through exemption, except in the rarest of cases, should almost never arise in a bankruptcy case.
Not only are there federal exemptions that allow people to keep property, Texas has its own generous set of exemptions. Understanding these exemptions may eliminate concerns over losing assets.
Texas Homestead Exemption
In Texas, you can keep a home of any value. However, to be exempt, it must be on 10 acres or less in a city, or on 100 acres or less in the country. Families get an increased exemption of 200 acres or less in the country. Of course, in order to keep the home permanently, you must be able to continue making payments on it.
Texas Motor Vehicle Exemption
In Texas, you can keep one automobile per every licensed driver in the household, regardless of the auto's value. As is the case with a house though, you must be able to continue making payments on an automobile in order to keep it in the long-term.
Texas Personal Property Exemption
This is the exemption that covers the majority of the items you have in your household, from furniture to athletic and sporting equipment to firearms. This exemption also covers livestock and much more.
Chapter 7 Versus Chapter 13
One important factor to be aware of is that there are multiple types of bankruptcy. Chapter 7 is the type that calls for liquidation of assets in order to pay debts. In the rare case when assets are not exempt, a person may be able to file Chapter 13, which does not require the sale of assets and instead allows an individual to create a plan to repay debt.
Exemptions Are Not Automatic
Great care must be taken, first in choosing between federal and state exemptions, and then in handling the exemptions correctly. Additional documentation may need to be submitted, including a homestead declaration. Furthermore, loans may need to be reaffirmed for assets you will continue to make payments on, such as your home.
These matters can be complex, which is why it is important to have an experienced attorney on your side to see that nothing is overlooked. At Wm. Barry Phillips, P.C., our decades of experience mean we are well-versed in exemptions and can help you navigate the bankruptcy process. You can begin with a free consultation.