Chapter 7 Bankruptcy Exemptions in Texas: What Property Can You Keep?

Jeremy March 3, 2025 0

What Are Bankruptcy Exemptions?

In a Chapter 7 bankruptcy, a court-appointed trustee technically has the right to take and sell your non-exempt property to pay creditors. Bankruptcy exemptions define what property you can protect (or “exempt”) from this process.

Texas allows bankruptcy filers to choose between two exemption systems:

  • The Texas state exemptions
  • The federal bankruptcy exemptions

Most Texans benefit more from using the Texas state exemptions, which we’ll focus on in this article.

Texas Homestead Exemption: Among the Most Generous in the Country

Texas is famous for its unlimited homestead exemption. Unlike many states that cap the value of home equity you can protect, Texas allows you to exempt your entire homestead regardless of value, with only these limitations:

  • Urban homesteads: Up to 10 acres of land with improvements (your home and any other buildings)
  • Rural homesteads: Up to 100 acres for a single person or 200 acres for a family
  • Residency requirement: You must have owned the property for at least 6 months (with some exceptions)

This means that if you own a $500,000 home in Houston with no mortgage, you can typically keep it entirely through Chapter 7 bankruptcy as long as it fits within the acreage limits.

Motor Vehicle Exemptions

Texas allows you to exempt:

  • One motor vehicle per licensed household member
  • An additional motor vehicle for each unlicensed household member who relies on someone else for transportation

There’s no value limit on these vehicles, which is another significant advantage of Texas exemptions compared to many other states.

Personal Property Exemptions

Texas allows you to exempt up to $50,000 in personal property for a single person or $100,000 for a family. This includes:

  • Home furnishings, including family heirlooms
  • Clothing and food
  • Farming or ranching vehicles and implements
  • Athletic and sporting equipment (including firearms)
  • Jewelry (subject to the overall personal property limit)
  • Two firearms
  • Pets and domestic animals plus their food
  • Bible or other sacred religious text
  • Health aids
  • Health savings accounts

Retirement Account Exemptions

Nearly all retirement accounts are 100% exempt in Texas, including:

  • 401(k)s, 403(b)s, profit-sharing and pension plans
  • IRAs and Roth IRAs (traditional and Roth)
  • Defined benefit plans
  • Texas state and municipal employee retirement plans
  • Teacher retirement system benefits

Insurance Exemptions

Texas protects various types of insurance, including:

  • Life insurance policy cash surrender values
  • Proceeds from a life insurance policy
  • Texas employee group insurance benefits
  • Fraternal benefit society benefits
  • Health, accident, or annuity benefits due to an illness or disability

Wages and Other Benefits

Texas protects:

  • Unpaid wages
  • Earned but unpaid commissions (up to 75%)
  • College tuition savings plans
  • TANF public benefits
  • Crime victims’ compensation
  • Unemployment benefits
  • Workers’ compensation

Tools of Trade Exemption

Equipment, tools, books, and materials that you use in your job or profession are exempt up to the personal property limit of $50,000/$100,000.

Wildcard Exemption

Unlike some states, Texas does not offer a wildcard exemption that allows you to protect additional property of your choosing.

Strategic Planning Before Filing

The strategic use of exemptions often involves pre-bankruptcy planning, which might include:

  1. Converting non-exempt assets into exempt assets (within legal boundaries and time limitations)
  2. Timing your bankruptcy filing to maximize exemption benefits
  3. Evaluating whether Chapter 13 would better protect your non-exempt assets

Remember that any pre-bankruptcy planning must be done honestly and within the bounds of the law. The bankruptcy court can revoke exemptions for fraudulent transfers or misrepresentations.

When Federal Exemptions Might Be Better

While Texas exemptions are generous in many categories, there are situations where the federal exemptions might be more beneficial, such as:

  • When you have significant equity in personal property but little home equity
  • When you need the federal wildcard exemption to protect particular assets
  • When you have valuable items that might exceed Texas personal property limits

The Importance of Professional Guidance

Exemption laws are complex and constantly evolving through court decisions. What you can exempt depends on your specific circumstances and how courts in your jurisdiction have interpreted the exemption statutes.

Before filing bankruptcy, it’s crucial to consult with an experienced bankruptcy attorney who can:

  • Analyze your complete asset picture
  • Determine which exemption system will protect more of your property
  • Help you legally plan to maximize your exemptions
  • Ensure all exemptions are properly claimed on your bankruptcy schedules

Conclusion

For most Texans considering Chapter 7 bankruptcy, our state’s generous exemptions mean you can get relief from overwhelming debt while keeping your most important assets. With proper planning and qualified legal guidance, bankruptcy can truly offer the fresh start it’s designed to provide.

At the Law Office of Jeremy T. Wood, PLLC, we specialize in helping Houston-area residents understand and maximize their bankruptcy exemptions. Contact us at 713.366.1288 for a free consultation to learn how we can help protect your property while eliminating unsecured debt.

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