Bankruptcy Exemptions

Texas Bankruptcy Exemptions

If you are considering bankruptcy, don’t worry about what assets will be claimed by creditors. Texas bankruptcy laws offer the most exemptions when filing bankruptcy.  These exemptions allow certain assets to be protected from liquidation.  Listed below are the personal property exemptions that are available under Texas state and Federal law.


The homestead exemption allows for protection with an unlimited dollar amount, if eligible under the standards put forth by Texas bankruptcy law. The property is limited to 1 acre if it is located within city limits and up to 200 acres (for family) if located outside city limits. The sale proceeds from a home are exempt for 6 months after the sale has been made. The state exemption laws require residency of at least 2 years prior to filing for bankruptcy. However, if you have not resided in Texas for the 2 years prior to filing bankruptcy, you may qualify for the Federal homestead exemption.  The Federal homestead exemption is limited to $125,000 and you must use the maximum of the limit if the property was purchased within 1215 days of the bankruptcy filing. If it is thought value was fraudulently added to the home within 10 years of filing for bankruptcy, your exemption value may be lowered. Additionally, you may not be eligible for Texas homestead exemption if you are convicted of felony abuse of bankruptcy laws, your debts owed were caused by federal violations or fraud. In the latter case, you would be forced to use the Federal exemption limit of $125,000.

Personal Property

A single adult is entitled to up to $30,000 in personal property exemptions. A family is allowed up to $60,000 in personal property exemptions.  The amount of the exemption cap is determined by the debtor’s status and can be allocated among one or more of the following categories.

  • Home furnishing—including family heirlooms can be claimed as exempt property.  The term home furnishing is meant in it’s ordinary meaning and does not include items such as portable phones and hand held video recorders. Common home furnishings include a couch, dresser, bed etc.
  • Jewelry—is exempt but  limited to 25% of the exemption cap.
  • Apparel—including clothing  and anything that is worn can be claimed as exempt property
  • Athletic and Sporting Equipment—including bicycles, workout equipment, rackets/balls  and small items of personal use can be claimed as exempt. Motorized sporting vehicles such as jet skis or power boats are not included and cannot  be claimed as exempt.
  • Motorized vehicles—a two, three or four wheeled motor vehicle for each member of the family is allowed for exemption. Each vehicle must have a corresponding member who holds a drivers license or is non-licensed but relies  on another person to operate the vehicle for the benefit of the non-licensed person.
  • Farm or ranch vehicles—can be included in exemptions.
  • Farm animals—including two horses, mules or donkeys, plus a saddle, blanket and bridle for each animal. Cattle are limited to 12, other livestock is limited to 60 and fowl are limited to 120 to be eligible for exemption.
  • Tools of the Trade—include anything that is required for you to conduct your prefession. Any tools, equipment, books, or motor vehicles that are necessary to perform your job duties can be exempt property.
  • Food—is allowed to be claimed for exemption.
  • Firearms—two firearms is the maximum that can be claimed for exemption.
  • Pets—household pets are allowed for exemptions; however, if you own an exotic pet you may need to check with your attorney to see if it qualifies.

Health aids

Aids that are professionally prescribed for the use by the debtor are exempt and protected from seizure. This includes wheelchairs and elevators for those who have trouble walking, air conditioning for those suffering from asthma or hearing aids and eye glasses for others. It does  not include items that are not medically necessary such as swimming pools/saunas, gym equipment or bicycles.


Life insurance policies with an unlimited dollar amount (determined as current value) is exempt if a dependent or family member of the debtor is the beneficiary of the policy. Term life insurance policies will have not have a determined current value. Insurance for life, health, accident, mutual insurance or any program of benefits being used by an employer qualifies under this exemption. Texas bankruptcy law states that insurance benefits cannot be seized to pay the debts of the beneficiary. There are two reasons why this exemption would not be allowed. If the creditor is seeking to recover fraudulent insurance premium payments made by the debtor filing for bankruptcy, this exemption is not allowed. Secondly, this exemption is not allowed if the creditor is attempting to foreclose on its security interest or its proceeds promised to secure the debt of the beneficiary.  If insurance benefits are liquidated prior to filing for bankruptcy there is no guarantee those benefits will be safe from seizure during bankruptcy.


A person’s current wages for services are exempt unless the wages are being garnished for court-ordered child support or alimony payments. Texas bankruptcy law prevents monies received as child support or alimony payments to be exempt from seizure. If a debtor receives these payments, the trustee cannot use this money to repay creditors as long as those payments are needed for housing, food and basic need of dependents.  Any earned but unpaid wages are exempt from seizure under Texas bankruptcy law. For individuals who worked but did not receive a paycheck, those wages are protected from seizure while in bankruptcy. The debtor must have be a W2 employee in order to be protected under this exemption. Independent or contract workers (1099 tax form) are not protected under this exemption. Self-employment wages will be treated as unpaid commissions for personal services which are included in the property exemption. Texas bankruptcy law states that up to 75% of unpaid commission are exempt from seizure but are subject to the exemption cap and cannot exceed 25% of the cap.

Retirement Plans

Texas bankruptcy laws allow unlimited exemption for monies kept in qualified accounts and are allocated for retirement. Qualified accounts are those that are tax-deferred plans created by employers for their employees such as, 401(k), 403(b)s, profit sharing plans, IRAs and some social security benefits. IRA and retirement plans for the self-employed are partially exempt, whereby contributions to the account must not exceed the maximum contribution exempt from federal income tax. This exemption does not prohibit the plan beneficiary from borrowing from the plan and granting a lien on interest in the plan to secure a loan. If you used your retirement plan as collateral for a loan and defaulted, you may not qualify for this exemption. Texas County and District employees, Municipal employees, State employees, Elected officials, Law enforcement office, emergency medical personnel, firefighters, Teachers and  Members of ERISA are all exempt under Federal and Texas bankruptcy law.


Texas bankruptcy law protects some aspects of a military service member’s property from being seized during bankruptcy.  Military group insurance benefits, survivor benefits and seaman’s wages while on duty are some of the exemptions allowed by Texas bankruptcy law. If a debtor is currently serving in the military on permanent duty outside of the United States, any military service deposits into savings accounts are exempt.  The Service members’ Civil Relief Act prevents judgments against military service members while they service outside of the United States on active duty. Additionally, if the debtor is unable to repay debts due to their service in the military, the courts may halt  any judgments and garnishments during such time.  Court ordered exemptions typically last until the debtor’s service has ended and up to three months following their exit from service. Veteran’s benefits are typically exempt from seizure during bankruptcy. Any benefits that have been, or will be received, fall into exemption under the Texas bankruptcy laws.  If the veteran’s benefits have been permanently invested the benefits will not be protected under this exemption. The veteran benefits will not qualify for this exemption if the benefits are to be seized to satisfy child support payments.