What are the Texas Bankruptcy Exemptions?

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Written by the Upsolve Team.  Reviewed by Andrea Wimmer, Esq.
Updated June 22, 2020


If you live in Texas, you are lucky. It is one of the best states in the US in which to file bankruptcy. Here is why you will benefit from filing bankruptcy in Texas. Some US states, including Texas, allow filers to choose between the federal bankruptcy exemptions and the state exemptions. However, it has to be one or the other—if you opt for the Texas state exemptions, you cannot cherry-pick specific exemptions off the federal bankruptcy exemptions, and vice versa.

What are the Texas bankruptcy exemptions, and why are they important in a Chapter 7 bankruptcy?

If you have been struggling with mounting debt, such as credit card debt, you might be interested to know what relief bankruptcy offers. However, you may hesitate to seek help as you may have heard or read that you would need to sell your property, such as your motor vehicle, during the process. Although some filers might have to surrender an expensive asset, a majority of people don’t lose any property when filing a Chapter 7 bankruptcy in Texas. This is contrary to some commonly held myths about bankruptcy. Bankruptcy exemptions in Texas, like other states, protect your most treasured assets, such as furniture, clothing, and interest in a home, from the reach of your creditors.

An exemption is a law that protects certain property from the claims of your creditors. A bankruptcy trustee cannot seize exempt property in a liquidation (or Chapter 7 filing).

In fact, Texas bankruptcy exemptions are designed to allow filers to keep certain property, like equity in their home, their automobile, household furniture, clothing, firearms, and even the family bible.

Many people in Texas think that filing for bankruptcy will cost them everything they own. This is not true. There are several protections or exemptions available to help you keep more of your property or pay less to your unsecured creditors. These bankruptcy protections are mentioned in Texas exemption laws.

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Does Texas allow the use of federal bankruptcy exemptions?

If you live in Texas, you are lucky. It is one of the best states in the US in which to file bankruptcy. Here is why you will benefit from filing bankruptcy in Texas. Some US states, including Texas, allow filers to choose between the federal bankruptcy exemptions and the state exemptions. However, it has to be one or the other—if you opt for the Texas state exemptions, you cannot cherry-pick specific exemptions off the federal bankruptcy exemptions, and vice versa.

While you can’t protect property using both sets of exemptions, if you choose Texas state exemptions, you are allowed to use the federal nonbankruptcy exemptions, as well. Texas bankruptcy exemptions are favorable to you for a number of reasons. Firstly, the Texas Property Code exemptions are very generous. Secondly, the law provides you the option to choose the federal Bankruptcy Code exemptions if you find them more favorable in your specific situation.

As the Texas exemptions are extremely generous, in most cases, you will be better off using them rather than the federal bankruptcy exemptions. However, if you have certain assets that are not covered by a state exemption, like lawsuit proceeds, you may want to consider making the most of the generous wildcard exemption contained in the federal bankruptcy scheme.

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Texas Bankruptcy Exemptions

Bankruptcy exemptions in the state of Texas are definitely among some of the most generous in the country. When you file for Texas bankruptcy, all of your possessions will be listed along with any amount that is owed to you. Note that these will comprise your total assets. And if you’re filing a Chapter 7 bankruptcy in Texas, your bankruptcy trustee has the right to sell your nonexempt assets to recover funds for your creditors. However, if you use the allowed exemptions set forth by the law, you can easily protect your property, such as your home or car, and keep a significant amount of your assets.

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Real Property - The Texas Homestead Exemption

Texas allows you to choose between state and federal bankruptcy exemptions to protect your property in a Chapter 7 bankruptcy. Whether you go with federal exemptions or state exemptions will depend on which set of exemptions protects your property best. In a lot of cases, filers prefer Texas bankruptcy exemptions over federal exemptions as the state has fairly generous policies, like the homestead exemptions. In most bankruptcy cases, a filer’s most treasured asset is her or his home. This important asset is adequately covered in Texas.

In short, the Texas homestead exemption allows filers to protect an unlimited amount of equity in their home. There are, however, limitations based on the property’s acreage and location. For example, rural residences in the state have a much broader acreage limitation than homes in urban areas. If you reside in a city, town or village, Texas allows you a homestead exemption provided your property is on ten acres or less. In other parts of Texas, the acreage allowed is a hundred acres outside of the city. 

And here is another benefit. If you sell your property, any profits from the sale are protected for a period of 6 months following the sale. Again, keep in mind that the homestead is only protected if you use it as your residence rather than a rental property. 

Wild Card Exemption

In most cases, state exemptions are the right choice for you if you have sizable equity in your home or have a significant amount of personal property. While Texas law provides generous bankruptcy exemptions for your house, car, and other personal property, one great advantage of choosing federal bankruptcy exemptions is that you will benefit from the “wildcard exemption.”In Texas, state laws do not have a wildcard exemption that you can use in order to protect any assets of your choosing.

So, you have the right to apply the federal wildcard exemption to any property of your choice. With the exemption, you may protect up to $1,125 plus up to $11,500 leftover from your homestead exemption. 

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Personal Property Exemptions

Apart from the Texas homestead exemption, if you are filing bankruptcy in Texas, you can also claim other Chapter 7 exemptions that cover your personal property. Remember that personal property includes motor vehicles, home furnishings, clothes, jewelry, livestock, and other items. In Texas, personal property, like a car that isn’t considered real estate, is also subject to a number of bankruptcy exemptions. For a single filer, these exemptions can’t exceed $50,000, while for a joint bankruptcy filing in the state, the amount is doubled. Note that some items may have specific limitations imposed and a bankruptcy lawyer in Texas will discuss them with you.

Motor Vehicle

Texas exemptions are also quite liberal regarding cars or motor vehicles. In Texas, the law specifies that motor vehicles are protected in a bankruptcy filing. The state motor vehicle exemption allows filers to exempt the complete value of one car per licensed household member. So, for every member in your home with a driver’s license, one motor vehicle is exempt. And if a member of your household doesn’t have a driver’s license but owns a car that someone else operates on their behalf with a license, then that car is also exempt. Note that this often applies in the case of individuals with disabilities.

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Other Personal Property 

You can protect the following personal property.

  • You can protect athletic equipment and sporting equipment, including your bicycles under Section 42.002 (a)(8)

  • You can protect up to 2 firearms under Section 42.002 (a)(7)

  • Home furnishings, such as family heirlooms, are exempt under Section 42.002 (a)(1)

  • You can protect jewelry worth up to $25,000 (and $12,500 if you’re single) under Section 42.002 (a)(6).

  • Bibles and other books with sacred or religious writings are exempt under Section 42.001 (b)(4). Note that these books are not subject to the $50,000 or $100,000 limit

  • You can protect food and clothing under Section 42.002 (a)(2),(5)

  • Burial plots are exempt under Section 41.001. Health aids, like wheelchairs, hearing aids and canes, are exempt under Section 42.001 (b)(2).

  • You can exempt animals, including domestic animals and pets and their food under Section 42.002 (a)(10),(11). This includes 2 horses, donkeys or mules, plus tack; twelve head of cattle; sixty head of any other livestock as well as 120 fowl. 

  • Health savings accounts are protected under Section 42.0021.

Money Benefits

Pension and Retirement Accounts Exemption

Both federal and state laws allow you to protect most retirement accounts and pensions that are tax-exempt. So, if your retirement account or pension is exempt from tax under the US Tax Code, then it will likely qualify for bankruptcy exemptions. 

And an experienced bankruptcy lawyer in Texas can review your retirement fund or pension to determine if it is eligible for bankruptcy exemptions and tax-exemption. State bankruptcy exemption laws in Texas allow for an additional retirement account and pension exemptions that the federal law doesn’t. 

Note that those include the following kinds of accounts:

  • Employee pension and retirement benefits for district and county employees

  • IRAs, Keoghs, and Roth IRAs

  • ERISA-qualified church or government benefits

  • Survivor benefits for firefighters, police officers, and emergency medical staff

  • Police and firefighter retirement as well as pension benefits

  • Pension and retirement benefits for judges

  • Retirement accounts for elected officials, municipal employees, and state employees

  • Retirement benefits and pensions for school teachers

  • Other tax-deferred retirement benefits 

Also, keep in mind that many organizations and companies offer creative retirement plans for their employees. You might be unsure whether or not your pension benefit or retirement account will qualify for bankruptcy exemptions. In this case, the best option is to gather all your documents and have a professional bankruptcy attorney in Texas evaluate your benefit accounts before filing for bankruptcy.

Insurance Exemptions

Insurance companies offer you some benefits through either monetary payments or accumulation. These benefits can be exempt under state or federal law. In most cases, you have to report these assets when filing bankruptcy. However, an experienced attorney in Texas can help you seek exemptions of your various insurance policies and insurance benefits. In Texas, the following are usually exempt:

  • Life, accident, health, or annuity benefits that are due to or have been paid to beneficiaries or insured

  • Fraternal benefit society benefits received through different societies. These include societies, like Freemasons, Elks, and Knights of Columbus, etc.

  • Uniform group insurance benefits for Texas employees

  • Group insurance benefits for public school employees in Texas

  • Benefits of employees of state colleges and universities in Texas

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Other Texas Exemptions

Lawsuit Settlement Exemptions

If you have obtained a legal verdict in your favor or received a settlement from a legal claim, then that amount isn’t likely exempt under federal or state law. Also, any pending claim will be considered as an asset when you file for bankruptcy. You will have to disclose this information in your bankruptcy paperwork at the time of submitting your initial filings. However, the good news is that the federal exemption set offers a some protection for personal injury and wrongful death awards and has a wildcard exemption that you may use to protect a certain portion of these funds.

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Filing Chapter 7 Bankruptcy?

Bankruptcy laws in the US are often revised, so it’s always a good idea to consult with a professional lawyer in Texas who specializes in bankruptcy law. The attorney may also be familiar with bankruptcy trustees in your specific district, helping you successfully navigate the whole bankruptcy process. They can also tell you whether Chapter 7 or Chapter 13 bankruptcy is better for you. 

Also, there are several other exemption constraints that can apply in your bankruptcy case, which you can review with your bankruptcy lawyer to decide which type of bankruptcy is better for your situation. An attorney will advise you on how bankruptcy proceedings would impact your individual situation, ensuring that you receive the maximum benefit from all the exemptions that are available to you. If you are not able to afford a bankruptcy attorney to help you, you can take this simple and short quiz to find out if Upsolve can help you. 

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About the authors

Andrea Wimmer, Esq.

Andrea practiced exclusively as debtors’ counsel in consumer chapter 7 and 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team full time in August 2019. While in private practice, Andrea handled all ban... read more

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