Getting in over your head with debt doesn't take much. An unexpected illness, death in the family or loss of a job could leave you a few weeks behind in income. That can easily snowball into a situation where you're facing creditor calls and unable to make payments on all of your obligations due to increased payment amounts, penalties, fees, fines and interest.
If your debt has grown out of control, you may find yourself considering bankruptcy. However, you're also probably worried about how a Chapter 7 bankruptcy could affect your status as a homeowner. After all, the bankruptcy court has the power to liquidate some of your assets to repay creditors. If loss of your home is what's keeping you from seeking bankruptcy relief, there's great news. Texas has incredibly generous exemptions for homeowners.
Texas has bigger homestead exemptions than most other states.
So long as you have lived in Texas for at least 40 months, you have the right to claim the Texas state bankruptcy exemption for your homestead. If you have lived in the state for less than three years and four months, you will likely only get to claim the federal homestead exemption amount, which is around $146,000.
The Texas state exemption is far more generous, in part because of the strong agricultural roots of many in the state. Most states put a strict financial limit on the amount of equity in the primary home that's permissible for those filing for bankruptcy.
In Texas, however, there is no financial limit to the amount of equity you can exempt from consideration, as long as you don't own more than 10 acres in a city, village or town or more than 100 rural acres (or 200 if you have a family). Any amount of equity you have in your property, provided that it meets those criteria, will not end up liquidated by the courts when you file for debt relief via bankruptcy.
You can retain your home and end those collection calls.
By claiming your primary residence for the homestead exemption when you file for bankruptcy, you can retain all of the equity in your property and also gain the relief of Chapter 7 bankruptcy. That includes an immediate stay against collection activity, including collection calls and pending lawsuits. Chapter 7 also provides for the potential discharge of your unsecured debts, such as credit cards or medical debt.
Depending on the value of your other assets, including farm equipment or a personal vehicle, you may have to surrender some assets to the courts for liquidation. However, you will also have a fresh start that will allow you to rebuild your financial life.