Considering filing for Chapter 7 or Chapter 13 bankruptcy in Texas? You may have several questions about how the process works and how it will affect your financial future. Many people assume that filing for bankruptcy will cost them everything they own, but there are in fact several protections available to help filers keep more of their property or pay less to unsecured creditors. These protections are contained within Texas exemption laws.
What is a Bankruptcy Exemption?
When an individual files for bankruptcy, everything they own as well as anything to which they are entitled becomes part of an estate. A trustee can sell all estate property to repay creditors in a Chapter 7 case; in a Chapter 13 case, a filer would be obligated to pay into their plan at least what their creditors would have received in a Chapter 7 filing. Thankfully, there are some state bankruptcy exemptions when it comes to taking property out of an estate (these are separate from the list of federal exemptions). If a married couple files for bankruptcy jointly, they can even double their exemption amount for jointly-owned property.
Texas offers the following exemptions:
- Homestead exemption: Residences on 100 acres or less in the country or 10 acres or less in a city are exempt. If the house is sold, the proceeds are exempt for six months after the sale.
- Personal property exemptions: Up to $100,000 worth of property ($50,000 if a single adult without a family) can be exempt. Items that can be exempt include sporting equipment, up to two firearms, family heirlooms, home furnishings, animals, clothing and food, burial plots, health aids, health savings accounts, and jewelry (limited to one-quarter of the exemption).
- Motor vehicle exemption: A filer can exempt the entire value of one vehicle per licensed member of their household.
- Retirement account/Pension exemption: The majority of tax-exempt retirement accounts and pensions will be exempt in bankruptcy.
Experience, Reputation, Dedication: Top Quality Legal Counsel in Dallas/Fort Worth & Northern Texas
Have further questions about which bankruptcy exemptions you may be able to claim? Consult with a Dallas bankruptcy attorney at Allmand Law Firm, PLLC today! Attorney Reed Allmand, who is certified in Consumer Bankruptcy by the Texas Board of Legal Specialization, takes pride in helping good people obtain the fresh financial start they need to enjoy a better future. As one of the largest bankruptcy filing firms in the state of Texas and
with thousands of happy clients, you can feel confident entrusting your case to our care.
Bankruptcy Exemptions: Understanding Their Role before You File
If you wonder how people are able to keep their assets when they go through bankruptcy, it is because they used exemptions provided through the bankruptcy code. Just because you are unable to pay your creditors doesn’t mean you should be penalized by having all of your possessions being taken away from you.
People think this is the case, but understanding this in deeper detail before you file can help you get maximum protection for your assets. There are a few things about exemptions you should review with a bankruptcy expert to ensure you get the protection you need.
- There are two main types of exemptions including federal and state level.
- Exemptions provide protection for various types of assets such a house, vehicle, jewelry, and bank accounts. Exemptions offer different protection levels based on a specific amount. Such protection levels are known to vary from state to state, but you can learn what they are by reviewing your situation with an attorney. This is an important factor for debtors who may have or are considering moving from another state prior to their filing.
- Filing for protection allows you to keep assets you want as long as you provide complete and accurate details in regards to your property when you file.
- Leaving out information when you file may not allow you to get the protection you need or you run the risk of not getting debt discharged. If you hide details about an asset, you won’t be able to have it legally protected,
and it could be seized by the trustee. Disclose debts and assets honestly.
What You May Not Know about Bankruptcy Exemptions
Bankruptcy exemptions play a big role during bankruptcy proceedings and they have different effects on each chapter filed. In short, they help you protect property and assets, while helping to keep repayment plan payments affordable. Each state has exemptions at different levels and they are available at the federal level to provide additional protection.
If you want to know how you are able to keep possessions such as your house, vehicle, jewelry, bank accounts, retirement funds, and other assets, consider the following points on how exemptions help protect such items from creditors.
- Some state exemptions may provide protection up to a certain amount. A federal exemption may be able to provide full protection or help protect something that was not fully covered at the state level (also referred
to as a wildcard exemption).
- Some states may not have federal exemptions available to them, but instead have what is called federal non-bankruptcy exemptions. It’s an option available outside of the bankruptcy code that can help protect assets
for those in unique situations.
- There are specific exemptions available by the state to help protect assets such as your home and vehicle. For instance, equity in your home may be protected using the homestead exemption. Your vehicle may be protected using the motor vehicle exemption.
- Most often you have to use one set of exemptions either at the federal level or the state level. You may have the option to choose but qualifications may depend on how long you have been a resident of the state.
- Exemptions help determine if your property can be exempt from creditors. In Chapter 7 bankruptcy, if property is considered exempt it cannot be used to satisfy creditors. In Chapter 13 bankruptcy exemptions may help determine how much you pay to creditors, but they help keep payments low.
State Specific Bankruptcy Issues, Property Exemptions, Unemployment
Consumers still covered with high unemployment stats can protect property
The latest Gross Domestic Product report indicates that the recession will end this spring, and at the latest by the end of the year. Some analysts are evening predicting some growth in the last quarter of this year. The not-so-silver lining though is that job growth will still continue to lag behind. Many corporate executives are still receiving substantial compensation are likely to weather the end of the recession. The obvious concern then is how do you survive till the end of this financial storm without executive bonuses. Many people are tempted to use a slash and burn method of selling everything they own to cover what they can. Sacrifice is admirable, but it may not be necessary. Before you jeopardize everything, talk to a qualified bankruptcy attorney about property exemptions and how they apply to your situation. A property exemption allows you to remove certain property from the bankruptcy process and out of the reach of creditors. It is important when talking to a bankruptcy attorney that you make a complete list of everything that you own, and everything that you might own. You’re probably wondering about the phrase “might own.” Many people think solely about what they use and consider their property. If you’re married, you might consider your wife’s car hers and your car yours. However, in Texas, if both cars were purchased during your marriage, they are both probably considered community property and you both own them, (even if your spouse strong objects to the classification). The result will be similar in other community property states. If you’re not sure about your ownership status, err on the side of caution and review all items with your bankruptcy attorney. He can guide you through what is considered joint and separate property. From there, you can begin reviewing your options on how to protect property through bankruptcy. Items that can be protected through property exemptions include automobiles, homesteads, and household goods up to certain limits for your situation. What is finally eligible for exemption will turn on the bankruptcy rules of the state of your permanent residence. Even if you live in Texas now, you may be subject to the exemption rules of another jurisdiction if you only recently relocated. Even though the rules regarding exemptions seem a little confusing, keep in mind that a qualified bankruptcy attorney can guide you through them. Just because major corporations are sacrificing jobs to become more profitable doesn’t mean that you have to sacrifice everything you’ve worked for to survive. Options are available through a qualified bankruptcy attorney in your area.
Fraud Conviction Nullifies Debtor’s Bankruptcy Exemptions
In the recent Chapter 7 bankruptcy case of a Texas debtor, creditors in the case successfully objected to the debtor’s bankruptcy exemptions due to a felony conviction.
Debtor has been convicted of felonies (as defined in 18 U.S.C. § 3156) in United States of American v. Clovis Prince, Case No. 4:09-CR-161, in the United States District Court for the Eastern District of Texas. In particular, on December 9, 2010, a jury found Debtor guilty of (1) bank fraud in connection with loans that Debtor or his companies obtained from various banks, including American Bank; (2) engaging in monetary transactions in property derived from unlawful activity; (3) making false declarations under oath in a proceeding in his bankruptcy; (4) making false declarations in the statement of financial affairs and bankruptcy schedules submitted in his bankruptcy and in the bankruptcies for companies he owns and controls; and (5) making false declarations in his Rule 2004 examination taken in his bankruptcy (the “Guilty Verdict”).
Because of the fraud conviction and false statements made during the bankruptcy case, the bankruptcy debtor was denied the right to fully use their Texas homestead exemption.
Section 522(q)(1)(A) of the Bankruptcy Code limits a debtor’s homestead exemption limit where “the debtor has been convicted of a felony … which under the circumstances, demonstrates that the filing of the case was an abuse of the provisions of this title.” Here, the Guilty Verdict demonstrates that the filing of Debtor’s bankruptcy was an abuse of the provisions of Title 11 of the Bankruptcy Code. Accordingly, in this case, § 522(q)(1)(A) of the Bankruptcy Code limits the amount of Debtor’s homestead exemption for the Covington Court Property to $146,450.00.
If the debtor’s homestead exemption exceeds the amount allowed, the bankruptcy trustee will have the right to sell off the property and distribute to creditors any funds above the exemption amount stated above. Under normal circumstances, a Texas debtor would have a virtually unlimited homestead exemption amount allowing them to protect all the equity in their primary residence. But because of the debtor’s dishonesty in the bankruptcy case and their fraudulent dealings in terms of getting bank loans, that homestead exemption was limited by the bankruptcy court.
It’s also important to note that other assets such as clothing and household goods became exposed to creditor seizure due to the bankruptcy debtor’s untruthful statements. Normally, Chapter 7 bankruptcy debtors don’t need to worry about losing ordinary household goods because of generous bankruptcy exemptions and the general lack of value that such goods have; but this case was an exception due to the debtor’s illegal behavior. In the end, engaging in unlawful activity, before or during bankruptcy does not pay off for the debtor and exposes them to losing more assets than they normally would lose.
Speak to a bankruptcy attorney today
Learn more about how we can assist with your Chapter 7 or Chapter 13 bankruptcy by calling (214) 884-4020. Consultations are available free of charge!