Independent contractors experiencing overwhelming debt may want to consider Chapter 7 bankruptcy to find some relief and get a fresh financial start. However, as self-employed workers, they may worry about how filing for personal bankruptcy will affect their ability to continue their profession, particularly if repurchasing the tools or equipment for carrying on with the business may be difficult after the bankruptcy.
During bankruptcy, filers typically have to liquidate many of their assets so that the trustee can use those funds to pay creditors. But, the exemptions listed in Texas Property Code 42.002 may put an independent contractor’s mind at ease. The following types of property may be exempt from creditor seizure if the filer uses them for a trade or profession:
- Motor vehicles, including motorcycles and boats
Personal property that is exempt for any filer in Texas includes home furnishings, which may include desks, chairs and filing cabinets in a personal office, for example.
Another bit of good news for a Texas independent contractor who wants to file bankruptcy involves the homestead exemption. The World Population Review notes that in most states, there is a limit to the amount of property value a filer can claim as exempt in a bankruptcy. If the filer’s equity in the home is more than the exemption limit, the trustee may sell the property.
However, in Texas, homeowners have an unlimited exemption on their property of residence. So, an independent contractor who works out of his or her home does not have to worry about relocating and the headaches that may have entailed.