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Bankruptcy: Texas

Filing bankruptcy in Texas gives debtors a chance for relief from crushing debt, and gives creditors a chance to recover some payments based on the value of the debtor’s property or future earnings.  57,325 bankruptcies were filed in Texas in 2010, ranking Texas 48th in the nation for the number of bankruptcy filings per capita.  49% of Texas’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Texas

Bankruptcy in Texas is governed by federal law and all bankruptcy cases are initiated in the US Bankruptcy Courts in:

  • Texas Eastern District Courts: Beaumont, Lufkin, Sherman, Tyler
  • Texas Northern District Courts: Albilene, Amarillo, Dallas, Fort Worth, Lubbock, San Angelo, Wichita Falls
  • Texas Southern District Courts: Brownsville, Corpus Christi, Houston, McAllen, Laredo, Victoria
  • Texas Western District Courts: Austin, El Paso, Midland, San Antonio, Waco

While federal courts have jurisdiction over bankruptcy proceedings, Texas law lets petitioners choose from exemptions listed in the U.S. bankruptcy code or in the Texas state code. The federal and state exemption systems are not interchangeable; you must choose one or the other. With the guidance of a bankruptcy attorney Texas petitioners can gain a full understanding of what personal property the systems permit the debtor to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Texas

Chapter 7 bankruptcies in Texas account for nearly half of the state’s bankruptcy filings. Chapter 7 may be preferable for petitioners who do not have a substantial amount of assets, such as significant investments or equity in a home, because a Bankruptcy Trustee may liquidate personal property that is not protected by Texas’s bankruptcy exemptions. Liquidation takes place when the Trustee converts personal assets to cash to divide among creditors. Texas’s Chapter 7 bankruptcy law allows petitioners to keep some essential property, as the exempt assets are off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Texas Bankruptcy Exemptions

Texas’s state laws include detailed property exemptions that allow debtors to keep certain personal property and assets so no debtor has to move forward from bankruptcy entirely destitute.  Bankruptcy in Texas allows petitioners to choose exemptions from either the federal or state lists.

Personal property exemption values change, so it is important that debtors speak with a knowledgeable Texas bankruptcy attorney before they jump to conclusions about what bankruptcy can do for them.  Texas bankruptcy exemptions include:

Texas Homestead Exemption

  • Must file homestead declaration, or court will file on petitioner’s behalf and charge the petitioner for doing so
  • Unlimited value: property cannot exceed 10 acres in town, village, city or 100 acres (200 acres for families) elsewhere;
  • Sale proceeds exempt for 6 months after sale; Renting is permitted if another home is not acquired)

Texas Personal Property Exemption

  • Health savings accounts
  • Health aids
  • Clothing and food
  • Home furnishings including family heirlooms
  • Pets and domestic animals plus their food: 120 fowl; 2 horses, mules or donkeys and tack; 12 head of cattle; 60 head of other livestock
  • 25% of total exemption: Jewelry
  • 1 two-, three- or four-wheeled motor vehicle per family member or per single adult who holds a driver’s license; or, if not licensed, who relies on someone else to operate vehicle
  • Athletic and sporting equipment, including bicycles
  • 2 firearms
  • Bible or other book containing sacred writings of a religion
  • Burial plots

Texas Tools of Trade Exemption

  • Farming or ranching vehicles and implements
  • Tools, books and equipment including boat and motor vehicles used in trade

Texas Wage Garnishment Exemption

  • Earned but unpaid wages
  • Unpaid commissions cannot exceed 25% of total personal property exemptions

Texas Public Benefits Exemption

  • Public assistance
  • Medical assistance
  • Workers’ and Unemployment compensation
  • Crime victims’ compensation

Texas Insurance Exemption

  • Texas public school employees group insurance
  • Texas state college or university employee benefits
  • Texas employee uniform group insurance
  • Fraternal benefit society benefits
  • Life, health, accident, or annuity benefits, monies, policy proceeds and cash values due or paid to beneficiary or insured

Texas Pensions and Retirement Savings Exemption

  • Municipal employees, elected officials and state employees
  • County and district employees
  • Judges, Law enforcement officers, Police officers, firefighters, emergency medical personnel and their survivors
  • Teachers
  • Tax-deferred Retirement benefits
  • ERISA-qualified government or church benefits, including Keoghs and IRAs (limited to tax-deductible contributions);  not Roth IRAs

Texas Miscellaneous Exemption

  • Alimony and child support
  • Prepaid tuition plans
  • Higher education savings plan trust account
  • Liquor licenses and permits

Chapter 13 Bankruptcy, Texas

In 2010, ­51% of petitioners filed for protection under Chapter 13 bankruptcy laws in Texas.  When a petitioner files Chapter 13 bankruptcy in Texas, a court-appointed Trustee reorganizes the petitioner’s debts and develops a 3-5 year repayment plan, by which creditors are repaid using the debtor’s future earnings.  Chapter 13 petitioners in Texas keep most – or all – of their property.

How to File Bankruptcy in Texas

Qualifying for property exemptions is a deciding factor for many debtors considering filing for bankruptcy protection. The ideal solution would allow debtors to keep major assets and debts would qualify for discharge.  Because every case is unique, a Texas bankruptcy attorney can review a debtor’s personal circumstances and advise whether Chapter 7 or Chapter 13 bankruptcy is a feasible solution to their financial problems.

Bankruptcy Attorney: Texas

It is essential that a bankruptcy debtor be familiar with their rights and obligations as a petitioner.  A Texas bankruptcy attorney can interpret and simplify the federal laws and state exemptions for individuals or couples contemplating bankruptcy protection.  Because personal bankruptcy cases can be technically complicated and emotionally taxing, the expert counsel of a Texas bankruptcy attorney can address concerns related to the legal impact of debts and bankruptcy and recommend a solution to potentially lessen financial and emotional stress.