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Common Concerns & Questions About Bankruptcy

A review of Texas exemptions from creditors’ claims

| Dec 11, 2019 | Creditors' Rights |

Like other states, Texas law allows debtors to claim exemptions that allow them to protect their property from creditors’ claims. While these are most commonly used in the bankruptcy process, debtors can legally claim them whenever facing the danger of a creditor seizing their property to satisfy an overdue debt.

As a word of caution, though, these exemptions only can hold off what the law calls an unsecured creditor, like a medical provider or a credit card company. In other words, a person usually cannot use exemptions to prevent the foreclosure of a mortgage or a repossession after the debtor defaults on an auto loan. Moreover, there are certain debts, like child support, to which a debtor may not apply exemptions.

There are many different types of exemptions available in Texas, and the rules for claiming then both the course of a bankruptcy and otherwise can be complicated. Therefore, a Tyler resident interested in learning more about exemptions should consider seeking professional guidance.

However, to give an overview of some of the more important exemptions, many retirement plans like 401(k)s are exempt from a creditor’s garnishment actions. Moreover, Texas has a very broad homestead exemption, which allows a person to protect his or her house, as well as several acres of land, from unsecured creditors.

Although the homestead exemption is broad, it is not absolute. Importantly, rental properties and other business properties are not subject to this exemption.

Other examples of exemptions include items like motor vehicles, of up to one per licensed driver in the house, and certain business tools and equipment. One’s personal furnishings are also exempt. For most personal property, a couple cannot claim a grand total of more than $100,000 in exemptions, with $50,000 being the limit for a single person.