Texas Bankruptcy Exemptions
A constant debate occurs between the exemptions allowed to keep an individual safe at the time of bankruptcy. Most states have the option of opting for federal exemptions (once mandated on the federal level) or state exemptions. State exemptions are created within each state’s constitution and statues and allow each state’s resident to keep certain assets for themselves. Each state has its own set of exemptions. Some states are more generous than others- and there has been a constant debate over the most generous state exemptions which exist. Though Texas, Florida and Nevada have been in the running for the most generous exemptions for individuals, it is quite obvious that Texas has the most generous exemptions. It is also important to note that exemptions only apply to individuals and are not applicable to businesses such as corporations or LLCs etc.
The first item to note when discussing exemptions is that an individual needs to be applicable to utilize the exemptions in their state. In Texas you are only applicable for state exemptions if you establish a domicile or principal residence in the state. After you can establish a domicile in the state of Texas then you have the choice between federal exemptions and state exemptions. Though the so called “federal exemptions” found in the Bankruptcy Code have been doubled, for example the real property limitation has been increased to $15,000 with aggregate household furnishings, wearing apparel etc is now set at $8000, the Texas exemptions are still quite superior. Therefore, the federal exemptions have been of limited consequence in Texas because the vast majority of Texas debtors choose to rely on the Texas exemption laws.
Texas has two types of personal property exemptions: (A) A complete exemption for certain kinds of personal property, limited by the combined value of the property; and (B) unlimited exemptions for specific kinds of personal property. Individuals as well as families are exempt from the claims of creditors for a market value combination that does not exceed $60,000 for a family and $30,000 for a single adult. The types of personal property that may be included are farm supplies, home furnishings, food, tools, boats, motors and accessories or even guns, clothes or jewelry. Automobiles are also included for each member of a family who holds a drivers license. Pets and animals are also included in this personal property exemption.
Option B includes the following kind of property (regardless of their value): current wages, alimony or support. There are a wide variety of properties that are covered in this option leaving much room for all investments and property to be protected under Texas law.
Perhaps one of the most positive attribute of Texas exemptions are its protection of future interests such as insurance policies and annuities. There are unlimited exemptions of the policy value or benefits to be paid protected from any judgment creditor (except for a child support lien). A debtor is protected in his assets of stocks, annuities, retirement accounts, and event charitable contributions or contracts that qualify under Employee Retirement Income Security Act of 1974.
Texas exempts two types of real property: (a) one or more cemetery plots: and (be) a homestead. Texas banktupcy courts were a source of analysis of the nature and extent of the homestead exemption found in the Texas Property Code and Texas Constitution. The homestead may be classified as urban or rural and it may be claimed by individuals or single adults. The urban homestead may be used as a home or/and a business. The urban homestead consists of up to ten acres on one more contiguous lots. A rural homestead for a family is limited to 200 acres and to a single person is limited to 100 acres. This allows the home to be as large as wanted and kept by any Texas as long as the mortgage and taxes are paid on the property. Also, if any property is sold the proceeds of the property is exempt for six months.
Texas has a strong policy to protect its citizens against creditors. Being a pro- private citizen state we do much to provide for our citizens in the protection against debt that is not secured. Though this may be seen as anti-business, especially in this economy, but in Texas the policy suggests strong protection for homes and property. So though people may hit hard times economically, they should never be without house and home.