If you are planning on filing for Chapter 7 bankruptcy, you may be wondering if you get to keep any of your assets or if you have to give up everything. Fortunately, there are some assets that the court considers to be exempt, which means you can hold on to them.
There are federal exemptions as well as exemptions the state of Texas names. You have the choice to decide which of the exemption rules you are going to follow.
What exemptions mean
According to FindLaw, when a person files bankruptcy, the judge orders the individual to turn over certain assets. The court uses the profit made from selling these to help pay back the creditors. Exempt property is an asset that the debtor can keep. Exempt property generally refers to assets that are necessary for working and living so the debtor can get back on his or her feet.
The federal government has made a list of what it deems to be exempt property. Some examples include:
- Reasonably necessary furniture, clothing, household goods and appliances
- Motor vehicles and jewelry, up to a certain amount
- Some of the equity built up in the home
- Pensions, public assistance and a portion of earned but unpaid wages
- Tools of the debtor’s profession, up to a certain value
The Texas Constitution and Statutes outlines the property that the state defines as exempt. A Texas resident can claim up to $50,000 of personal property, while a family can claim up to $100,000. Each household member that has a driver’s license may keep a motor vehicle.
Texas also has a generous homestead exemption. In many cases, this allows the debtor to keep the house during bankruptcy.