Can I Keep My House If I File Bankruptcy in Texas?
For most people, the home is the most important thing they own — and the fear of losing it is often the main reason they hesitate to file bankruptcy. Here is what you need to know: Texas has one of the strongest homestead exemptions in the entire country, and the vast majority of Texas homeowners who file bankruptcy keep their homes.
The Texas Homestead Exemption
Under Texas law, your primary residence is protected from most creditors regardless of its value. There is no dollar cap on the Texas homestead exemption for bankruptcy purposes, as long as the property does not exceed the acreage limits (10 acres for urban property, 100 acres for rural). This means a Houston homeowner with $400,000 in home equity can file Chapter 7 and keep every dollar of that equity. Creditors holding unsecured debts — credit cards, medical bills, personal loans — cannot touch it.
What About My Mortgage?
The homestead exemption protects your equity, but your mortgage lender still holds a lien on the property. Bankruptcy does not eliminate that lien. To keep the house, you need to keep paying your mortgage. If you are current on payments when you file, most people in Chapter 7 simply continue paying and keep the home without any issue.
What If I Am Behind on My Mortgage?
Chapter 7 does not give you a way to catch up on mortgage arrears. Chapter 13, on the other hand, is specifically designed for this situation. It allows you to catch up on missed mortgage payments over a 3-to-5-year repayment plan while keeping foreclosure on hold. For Houston homeowners facing foreclosure, Chapter 13 is often the most powerful tool available.
What About a Second Mortgage or Home Equity Loan?
In some Chapter 13 cases, it is possible to strip a second mortgage if the home is worth less than what is owed on the first mortgage. This strategy can eliminate tens of thousands of dollars in secured debt and is not available in Chapter 7.
Let’s Talk About Your Situation
Whether you are current on your mortgage or facing foreclosure, there are options. Call my Houston office at (713) 366-1288 for a free consultation. Let’s make sure you understand exactly what bankruptcy means for your home before you make any decisions.