Filing for bankruptcy can be a great resource for those who are financially insolvent. While many people worry about the fate of their assets, there are some laws that offer protection over much of one’s property. These bankruptcy exemption laws can be surprisingly thorough depending on which exemption is claimed.
Federal vs. State
Federal exemption laws are applicable to anyone in any state who wants to claim them. These exemptions offer a basic level of asset protection, but are intended to help those who may not be eligible to claim their state’s exemptions. Each state holds their own version of asset exemption laws and the protection can vary quite a bit. Texas is one of the most lenient states when it comes to bankruptcy exemption laws, offering a much wider net of security for those who claim them.
Texas bankruptcy exemption laws allow for each person filing for bankruptcy to exempt at least a portion of their personal property from garnishment or liquidation in bankruptcy. An individual filing for bankruptcy is eligible to exempt up to $30,000 in personal property, and a family of four can exempt up to $60,000. This exemption includes items such as furniture, food, clothing, firearms, sports equipment, income and certain retirement or benefit wages. Jewelry can also be exempt, but is limited to 25% of the total exemption cap value.
Under the law, one motor vehicle can be exempt per licensed member of the household. Perhaps the most notable exemption is the homestead exemption, which allows for eligible homeowners to protect a home of unlimited value from the bankruptcy. While there are some restrictions as to the size of the lot and location of the home, the Texas exemption offers far more homestead protection than the $125,000 maximum allowed under the Federal exemption.