Homestead Exemption, Home Protection, and Texas Bankruptcy

December 13, 2010

The Texas Homestead Exemption may be the most beneficial home law in our country, and it’s the prime reason that for many years some fled to Texas in order to get a home which could not be taken away. While the Bankruptcy Code changes of 2005 have stopped this, it’s easy to see why people were trying it. If you can save your home, you stand to save the thousands you invested into it, and maintain a residence. This is the home protection the Texas Homestead Exemption gives bankruptcy filers looking to keep their home, and it’s the focus of this guide.

How the Homestead Exemption Works

The Texas Homestead Exemption makes it so only one entity can take your home: the lender on your home. If you stop making mortgage payments, you can lose your home to foreclosure. On the other hand, if you have immense debts on your credit card, the creditor cannot take your home. This is different than other states. If you have a huge medical debt, even then your home cannot be taken. Again, the only entity who can take your home is the lender, so if you owe other money, the Homestead Exemption protects you. No matter what your home is worth, how much you owe, or who you owe money to, the Texas Homestead Exemption protects you. There are some limits on this, such as you can only have so much land, but most are eligible.

How to Protect Your Home

If you are fearing foreclosure, you do have options. If you owe money on the home, it is still possible to keep it. If you owe other debts, you can discharge them with bankruptcy,while at the same time be in no danger of losing your home. You must have lived in Texas the past 40 months to be eligible for the Homestead Exemption, so this process takes time. If you owe money to the lender, you might try to either discharge the debt with a Chapter 7 bankruptcy, where you would lose the home but owe nothing, or you can set up a debt repayment plan in Chapter 13 bankruptcy.

How Texas Bankruptcy Works
Chapter 7 bankruptcy eligibility is based on how much money you currently make. If you make millions of dollars a year, or just higher than the average Texas resident, you would not be eligible. If you are unemployed and have no income, you may not be able to keep your home but can discharge the debt. If you make less than average, you can file with Chapter 13 bankruptcy and start making payments on the mortgage.

Your Bankruptcy Options
Chapter 7 bankruptcy is best if you have impossible debts and little to no income. Chapter 13 bankruptcy is becoming more common because some are not eligible for Chapter 7. Chapter 13 can be quite effective if you make good money, but have debts you need time to pay off.

The Texas Homestead Exemption can protect your home, but remember you must be able to pay on it. If you are unsure of what to do next, contact an experienced Texas bankruptcy lawyer.

This Web site provides information about the law designed to help users safely cope with their own legal needs. Legal information is not the same as legal advice. The application of law varies with each specific case. We urge you to speak with a licensed attorney to receive assurance that the information on this site and your interpretation of the information is accurate.