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What is the difference between exempt and non-exempt assets in Chapter 7 bankruptcy?

If you are bracing for Chapter 7 bankruptcy in Texas, you may be wondering how the state classifies exempt and non-exempt assets.

Understanding the difference between the two can help you better prepare yourself for bankruptcy proceedings.

What do exempt and non-exempt mean?

In Chapter 7 bankruptcy, you must liquidate, or sell, certain assets to cover debts. These assets are non-exempt and are subject to liquidation. On the other hand, an exempt asset is not subject to liquidation, meaning things in this category can remain in your possession.

How do I know which of my assets are exempt?

Texas bankruptcy exemption laws vary somewhat from the federal guidelines, in many cases allowing you more freedom to keep personal property throughout bankruptcy. There are several categories of exempt assets, including home, vehicle, personal property and retirement accounts. If you have lived in Texas for 1,215 days, you may qualify for the homestead exemption. This means you can keep your house in Chapter 7 bankruptcy proceedings. Additionally, one vehicle for each licensed driver who lives in your household is eligible for exemption. While it may come as a surprise to you, retirement accounts are exempt, as well. The state of Texas also allows you to choose up to $50,000 worth of personal property to be exempt from bankruptcy liquidation as a single bankruptcy filer and up to $100,000 of personal property if filing jointly. This can include things like firearms, jewelry and clothing.

By knowing the difference between exempt and non-exempt assets, you can prepare yourself for bankruptcy proceedings and help protect your financial future.


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