Texas vs. Federal Bankruptcy Exemptions: What You Need To Know in 2025

What Are Bankruptcy Exemptions?

A lot of people worry that filing for bankruptcy means losing everything, but that’s not usually true. In fact, most people who file get to keep all of their property. That’s thanks to bankruptcy exemptions, which act like built-in legal protections for certain types of property.

When you file a bankruptcy case, all of your property becomes part of what's called the bankruptcy estate. The bankruptcy trustee assigned to your case can access that estate and may be able to sell property to pay back your creditors. But exemption laws allow you to protect certain property from being sold.

In some states, like Texas, you can choose between using federal bankruptcy exemptions or your state’s exemptions. But you can’t mix and match between the two systems. You have to choose one full set. That’s why it’s worth taking the time to compare both and figure out which one protects more of the things you want to keep.

What Are the Texas State Bankruptcy Exemptions?

Texas offers some of the strongest bankruptcy protections in the country, especially when it comes to protecting your home.

Texas Homestead Exemption

The Texas homestead exemption is unlimited in value. That means you could fully protect your home no matter how much it’s worth, as long as it sits on 10 acres or less in a city or 100 acres or less in the country. If you have a family, that rural limit doubles to 200 acres.

Just note: To claim the full exemption, you usually need to have owned the home for at least 40 months before filing.

By comparison, the federal homestead exemption is only $31,575. This mean you can only protect up to $31,575 in the equity in your home. Your home equity is equal to your home's current market value minus the balance on your mortgage and any other liens against the property.

Texas Motor Vehicle Exemption

Texas also allows you to protect the entire value of one car per licensed household member, even if that person doesn’t drive. This is more generous than the federal vehicle exemption, which is a flat $5,025.

Texas Personal Property Exemption

For personal property, Texas allows a total exemption of up to $50,000 for single adults or $100,000 for families. This includes:

• Clothing, furniture, and home goods

• Up to two firearms

• Family pets and livestock (like 12 head of cattle or 60 head of other animals)

• Athletic and sporting equipment

Texas also protects most retirement accounts, some insurance benefits, and certain wages. However, proceeds from lawsuits or legal claims usually aren’t protected. Also, Texas doesn’t offer a wildcard exemption.

How Do Texas Exemption Compare to Federal Exemptions? (Updated for April 1, 2025)

Federal exemptions offer protections for both real and personal property. These exemptions are adjusted every three years to keep up with inflation. Below are the most common federal exemptions as of April 1, 2025.

Federal Homestead Exemption

You can protect up to $31,575 of equity in your home. If you’re married and filing jointly, you can double this amount to $63,150. This exemption only applies to your primary residence—not to vacation homes or rental properties.

To figure out how much equity you have, subtract what you still owe on your mortgage (and any other liens) from the current market value of your home. For example, if your home is worth $200,000 and you owe $170,000, you have $30,000 in equity.

Federal Motor Vehicle Exemption

You can protect up to $5,025 of equity in one vehicle. This covers the value of your car after subtracting any loan balance you still owe on it. If your car is paid off and worth less than this amount, you’ll likely be able to keep it under this exemption.

Federal Wildcard Exemption

The wildcard exemption gives you extra flexibility. You can use it to protect $1,675 of any property you choose, plus up to $15,800 of unused homestead exemption if you didn’t use the full amount to protect your home. Many people use the wildcard to cover things like cash, bank account balances, or personal items that aren’t fully protected under other exemptions.

Though Texas generally has very generous bankruptcy exemptions, it doesn't offer a wildcard exemption, which is one advantage of federal exemptions.

Personal Property and Other Federal Exemptions

In addition to real estate and vehicles, the federal system protects many types of personal property and other assets:

• Household goods: Up to $16,850 total, with a limit of $800 per item (covers furniture, appliances, clothing, etc.)

• Jewelry: Up to $2,125

• Tools of the trade: Up to $3,175 for items you use to earn a living

• Unmatured life insurance: Up to $16,850

• Personal injury compensation: Up to $31,575 (not including pain and suffering or punitive damages)

• Health aids: Fully protected

• Retirement accounts: Most tax-exempt accounts like 401(k)s and IRAs are fully protected under federal law

These protections can go a long way in helping you keep the items you use every day or need to maintain your health, work, or standard of living.

Source: 11 USC § 522(d)(1), 522(d)(2), 522(d)(3), 522(d)(4), 522(d)(5), 522(d)(6), 522(d)(8), 522(d)(11)(D)

Let's Summarize...

Bankruptcy laws were designed to help people in serious financial distress get back on their feet. Bankruptcy is meant to give filers a fresh start, not to make them start over from nothing. That's why there are exemptions. Exemptions allow you to keep many, if not all, of the important items you'll need in your next chapter.

In Texas, you can choose whether you want to use the state's exemptions or the federal bankruptcy exemptions. To decide, you'll want to look at each set of exemptions as well as what property you own and want to protect.