People who are struggling with unmanageable financial situations are sometimes reluctant to pursue debt relief because they are worried about losing their homes. While this may be a real concern for people living in some parts of the country, it is something that Texas residents rarely have to worry about. This is because the Lone Star State has some of the nation’s most generous bankruptcy exemptions.

Federal and state exemptions allow individuals who file Chapter 7 and Chapter 13 bankruptcies to protect certain assets such as their automobiles and tools they use for work. Individuals seeking debt relief may choose between state and federal exemptions, but this is not a difficult decision for those living in Texas. Most states place a dollar limit on the value of a home or the amount of home equity that can be protected in a bankruptcy, but the homestead exemption in Texas is unlimited as long as the size of a the property does not exceed 100 acres in rural areas or 10 acres in a city, village or town.

However, the federal bankruptcy code contains restrictions to prevent people from moving to a particular state just to take advantage of its bankruptcy exemptions. Individuals must generally live in a state for at least two years before they can use its bankruptcy exemptions, but this time limit extends to 40 months for the Texas homestead exemption because it allows more than $146,450 to be protected.

Attorneys with debt relief experience could point out homestead and other exemptions when explaining how the nation’s bankruptcy laws were drafted to provide second chances and not leave individuals destitute. Attorneys may also explain that filing a Chapter 7 or Chapter 13 bankruptcy will generate what is known as an automatic stay. This is a court order that puts at least a temporary stop to lawsuits and salary garnishments and requires lenders to cease all collection efforts.

Source: National Bankruptcy Forum, “Chapter 7 Bankruptcy in Texas: What You Need to Know”, John O’Connor, Nov. 13, 2017