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Exemptions

Many people believe that if they file for bankruptcy, they will lose all of their assets and real estate so that their creditors can be paid. This is not true! Texas and Federal bankruptcy laws offer multiple real property (land and a home) and personal asset exemptions that prevent them from being taken from you. That means you are protected from liquidation! When your property and assets meet the qualifications for exemption, you don't have to worry about losing all of your property and certain assets you own.

However, you need to be aware that there is a cap or maximum amount that you can claim as exempt personal property. The cap amount is determined by your household and marital status. A single adult who is not a member of a family is allowed personal property exemptions of up to $30,000. That amount does not include any liens you may have. A family is allowed personal property exemptions up to $60,000. Again, that amount does not include any liens the family may have. Fair market value is the standard used to determine the value of any particular personal property item. Here are some of the specific personal and real property exemptions that are available under Texas state and federal laws.

Homestead Exemption

The homestead exemption protects equity in your home (homestead), which may be unlimited in dollar amount if certain conditions are met. If your property is located within city limits, the exemption limits the property to one acre. If the property is located outside city limits, and the person filing bankruptcy is a family member, the debtor may claim up to 200 acres. You must have lived in the property for two years to satisfy the residency requirement to qualify for the Texas exemption. However, if you cannot satisfy the state residency requirement, the federal exemption may be available. Other conditions also apply.

Home Furnishings Exemption

You can claim home furnishings, including family heirlooms, as exempt property. The term home furnishings refers to its ordinary meaning, items used to furnish a home. It does not include items such as portable telephones and hand held recorders.

Motor Vehicles Exemption

Each family member who has a drivers' license gets an exemption for the car that he or she owns. You can exempt two, three or four wheeled motor vehicles. These exemptions also apply for each family member who does not have a license but relies on another person to operate a vehicle for his or her benefit.

Food Exemption

The law recognizes food as a necessity and you can claim provisions for food as exempt property.

Jewelry Exemption

Jewelry is also exempt to the extent its value does not exceed 25% of the exemption cap.

Clothing Exemption

You can also claim wearing apparel as exempt property. This includes your clothing, but not any jewelry, because it has its own exemption.

Athletic and Sporting Equipment

Athletic and sporting equipment can qualify for exemption. The type of equipment includes but is not limited to items such as bicycles, stationary bicycles, workout equipment and other small items used for athletic and sporting activities. However, this does not include items considered more such as power boats, sail boats and personal watercraft.

Firearms Exemption

Protecting yourself is also granted. Debtors are allowed to exempt two firearms.

Household Pets Exemption

You can claim your dog or cat and other household pets as exempt property. Be aware, though, that exceptions may apply to exotic pets.

Health Aids Exemption

If you have health aids that are professionally prescribed for you or your dependents, those health aids are exempt regardless of value. This exemption includes wheelchairs, hearing aids, glasses, etc. However, this exemption does not include items used to promote good health such as exercise equipment which come under the athletic and sporting equipment exemption.

Insurance Exemption

If you are the designated beneficiary of an insurance policy or policies, you have an unlimited exemption of life, health or accident insurance benefits. This includes any plan or program of annuities and benefits that you have from any current or previous job. Creditors cannot seize these benefits to satisfy the beneficiary's debts. Be aware that the benefits exemption does not apply to a creditor seeking to recover premium payments made fraudulently to creditors, or to foreclose on a security interest where the benefits are used to secure the beneficiary's debt.

Wages Exemption

Current wages for personal services have a limited exemption, except for the enforcement of court-ordered child support or alimony payments, which are not exempt. However, if you are receiving those kind of payments, they are exempt, as long as they are needed for your dependents who are living with you. The exemption is limited, because it applies to earned, but unpaid wages. Be aware that once the wages are converted to cash, they are subject to seizure. Additionally, you can claim an exemption for unpaid commissions for personal services, as long as they do not exceed 25% of the limitation cap.

If you are self-employed or an independent contractor, you must rely on the exemption for unpaid commissions for personal services. Wages are limited to 75% of unpaid commissions, which are included in the property, subject to the exemption cap and cannot exceed 25% of the cap.

Tools of Trade Exemption

Tools of trade are exempt, including tools, equipment, books, motor boats, motor vehicles, or any other specific tools used in a trade or profession. Tools of trade are those that are used and particularly adapted to the debtor's trade or profession.

Retirement Plans Exemption

There is an unlimited exemption for monies set aside in qualified retirement accounts. Retirement accounts are qualified if they meet certain criteria established by the Internal Revenue Code. Generally, these are tax deferred plans, usually obtained through the debtor's employer, such as 401(k) plans, pensions, profit sharing, stock bonus plans or any other similar type of retirement annuity. IRA's and retirement plans for self-employed persons are also exempt, up to the amount that does not exceed the maximum contribution exempt from federal income taxes. This does not prohibit you, as debtor, from borrowing from the plan and granting a lien on it to secure a loan. However, if you, the debtor, defaults on the loan, the exemption may not apply. A debtor may also utilize any exemptions provided by federal non-bankruptcy law, in addition to either the state exemptions or the Bankruptcy Code exemptions. For example, federal law provides that Social Security benefits are not subject to execution, levy, attachment, garnishment, legal process, or the operation of the bankruptcy laws.

Farm and Ranch Vehicle Exemption

If you are utilizing farm and ranch vehicles, including machinery attachments or implements, you can claim them as exempt property.

Farm Animals Exemption

A certain number of farm animals qualify for exemption. This exemption is limited to two horses, mules, or donkeys, and a saddle, blanket, and bridle for each. It also includes 12 head of cattle, 60 head of other types of livestock, and 120 fowl.

Military Personnel Exemptions

There are some special protections for military personnel while they are in bankruptcy. During the bankruptcy process, active duty military service men and women can exempt their wages and insurance as well as their survivors' benefits. Also, federal law prevents judgments against military service members while they are on active duty outside of the United States. The exemptions typically last for three months after military service has ended. If the military personnel are on permanent duty outside the United States, the exemptions also apply to any deposits made to a U.S. Service Member's Savings Institution. Federal law also exempts veterans' benefits from seizure, both before and after receipt of those benefits, except for child support obligations.