In the Old West, many pioneers came to Texas to elude their creditors. Although the old west has been largely relegated to wax museums and Clint Eastwood movies, the pioneer spirit remains in Texas bankruptcy exemptions.
When the debtor files a Chapter 7 or Chapter 13 bankruptcy petition, assets are classified as “exempt” or “nonexempt”. Put simply, the debtor keeps exempt assets while nonexempt assets are sold to pay the moneylenders.
Exempt assets include:
- Your homestead
- Your personal vehicle
- Your retirement savings
Nonexempt assets include:
- Cash
- Income tax refunds
- Luxury items
The Wild Card Exemption
Unlike most other states, Texas debtors have the option to choose federal exemptions instead of state exemptions. The federal exemptions include the so-called “wild card exemption” in Section 522 of the Bankruptcy Code. The debtor is allowed to apply any unused portion of the homestead exemption to any property, including otherwise nonexempt assets.
For more information on the classification of assets in bankruptcy and how it affects your family, call Henley and Henley for your free consultation.