Some people in Texas who are unable to repay their debts hesitate to file for bankruptcy because of a fear that they will lose all their assets. However, Texas provides a generous list of exemptions and allows people to exempt many types of assets from the bankruptcy estate. While the trustee in a Chapter 7 case will sell nonexempt assets, most people who file for bankruptcy are able to exempt and keep most of their assets.
Exempt assets
Texans can choose between the state or federal exemptions when they file for Chapter 7 bankruptcy, but they cannot mix them. Texas’s exemptions are very generous, and many people choose the state exemptions instead of the federal ones. Some types of assets that are exempt in Texas include:
- A personal residence
- One motor vehicle per resident
- Personal property up to $50,000 per individual or $100,000 per married couple
- Retirement accounts and pensions
- Life insurance and annuities
Nonexempt assets
These are assets that the trustee can seize and sell to repay a portion of the debt that you owe to your creditors. Some types of nonexempt assets may include:
- Vacation property that is not your primary residence
- Second vehicles
- Personal property exceeding the exemption limit
- Proceeds from a lawsuit
If you have substantial nonexempt assets and a regular income, you can protect your assets by choosing to file for Chapter 13 instead of Chapter 7 bankruptcy. Chapter 13 involves restructuring your debts and agreeing to a repayment plan that lasts from three to five years instead of liquidating your nonexempt assets.
Most people who file for bankruptcy can protect most, or all, of their assets. Filing for bankruptcy can result in a discharge of your unsecured debts and provide you with a fresh financial start.