Bankruptcy: Exempt Property and Preferences

For many Americans, declaring bankruptcy is a way to escape the mountain of debt that has gathered around them: a way to wipe the slate clean and begin anew. If you, like many Texans, have found yourself overwhelmed by creditors demanding money you can't pay, and are fearful your home will be taken from you, get some peace of mind by contacting THE experienced Houston Bankruptcy Attorneys AT Adair and Myers. Texas Bankruptcy Lawyers Adair and Myers will help you become familiar with the vitally important details in filing for bankruptcy, details like the property exemptions and preferences in the state of Texas: knowledge which can make your eventual transition from bankruptcy easier.

Your homestead may be exempt from the liquidation of the assets to pay back your debts which can occur in Chapter 7. All of the equity you've saved and invested in your homestead may be protected under Texas exemptions, and homestead sale proceeds retain their exempt character for up to six months. Other personal property can be protected as well. You may be able to exempt your car in Chapter 7. Filing bankruptcy will stop repossession of a vehicle, but only for so long. In a typical Chapter 7, if you wish to keep the vehicle, you may need to 'reaffirm' the debt by signing a new contract before the bankruptcy closes. If you are behind on payments at the time of filing, however, the creditor may ask the bankruptcy court to allow it to repossess the vehicle, despite the bankruptcy filing. After the homestead, you may exempt most of the property in your household, including furniture, clothes, appliances so long as all of it is worth less than $60,000 if you're a family, or $30,000 for an individual.

Personal property exemptions in the State of Texas include:

  • 1 motor vehicle (2,3 or 4 wheel) per licensed driver in household
  • Household pets, domestic animals and their food ( 2 horses, mules, or donkeys & tack; 12 head of cattle; 60 head of other livestock; 120 fowl)
  • Athletic equipment, including bicycles
  • Bibles and/or other sacred texts
  • Burial plot (exempt from total)
  • Clothing and food
  • Health aids (exempt from total)
  • Health savings accounts
  • Furniture including family heirlooms
  • Jewelry (limited to 25% of total exemption)

Generally speaking, the Federal exemptions are not as generous as the State exemptions but they contain one component that some debtors find highly useful: the Wild Card, which allows a debtor to exempt almost anything up to a certain value. Determining which scheme is appropriate depends upon the debtor's circumstances and goals. Potential debtors should consult Qualified Houston Bankruptcy Attorneys at Adair and Myers to get a better evaluation of what may or may not be exempt.

Another aspect of declaring bankruptcy that potential debtors should know is that under the bankruptcy code, if a debtor pays one creditor more than he does others it is known as a preference. For example, if a debtor with $50 owes creditors X and Y $50 each, and the debtor pays the $50 to X, leaving nothing for Y, X has received a preference and Y has been harmed by the preference. Creditors receiving preferences can be forced to return them to the debtor's estate. A preference is when the following occurs:

  • The payment is for the benefit of a creditor
  • The payment is made for a debt owed prior to the initiation of bankruptcy
  • The debtor is insolvent at the time of the payment
  • The payment is made within 90 days before filing bankruptcy or within one year before filing if it is made to an insider such as a relative or director of a corporate debtor

Payments made to creditors in the three months before you file bankruptcy may be undone by the Chapter 7 trustee so that the trustee may distribute those funds equitably. For this reason, on the eve of filing, many people stop paying their credit card bills and put that money to other, wiser uses such as mortgage payments or utility bills

As anyone can see, filing for bankruptcy, while it may seem like a simple solution, is very complex. Filing with the guidance of an experienced bankruptcy attorney can ensure that you file correctly, are aware of your exemptions, and can avoid preferences. Contact Houston, Texas Debt Management Attorneys Adair and Myers at (713) 568-2791 to help you start fresh.