As a resident of Texas (residing in the state for more than two years), certain property you own will automatically be protected from seizure by your creditors. This protected property is commonly known as “exempt property”. Most notably, any equity in your homestead and/or vehicles (as much as $30,000 for vehicles per household member) will be protected from your creditors. The only exception to this is if your creditor has been granted a security interest in the property like a mortgage or car note. Under Texas law, creditors typically have to get a judgment before they can try and collect any “non-exempt” or unprotected property from you to satisfy a debt. The most common types of property that are non-exempt under Texas law are bank accounts and ownership interests in businesses.
Upon filing bankruptcy, a Texan has two sets of property exemptions they get to choose from: 1)the property exemptions provided by the Federal Government, or 2) the Texas property exemptions. The set of property exemptions that will be best for you will largely depend on the type of property you need to protect and the amount of equity in that property. If you have a large amount of equity in your house and vehicles, the Texas exemptions might be best for you. In addition to protecting your house and vehicles, you can also protect home furnishings, tools of the trade, jewelry, firearms, and livestock. The major things that are not going to be protected under the Texas exemptions are business interests (like ownership interests in companies or LLCs) or money in bank accounts.
The Federal property exemptions are only available to those who file bankruptcy. Like the Texas exemptions, the Federal exemptions allow you to protect equity in your homestead and vehicles, but not as much dollar-wise as the Texas exemptions. However, the Federal exemptions are more flexible than the Texas exemptions and allow you to protect things like bank accounts, business interests, and other miscellaneous property with the “wild card exemption.” The wild card exemption can be used to protect any sort of property you want; if you don’t have equity in any real estate, you can protect up to almost $12,000 in property! Certain property like social security proceeds, life insurance values, and retirement accounts (401K, IRA, etc.), are typically protected under both Federal and State exemptions.
Choosing the right set of property exemptions and applying them properly to your assets is extremely important in bankruptcy. If you claim the wrong exemptions, you can lose property that would otherwise be protected. The attorneys at Fears Nachawati will be able to walk you through this important process and make sure that you are able to keep all of the property you are entitled to keep by law. To get started with a free consultation, call us today.