When people in Texas file for Chapter 7 bankruptcy, they can claim exemptions to protect some of their assets from being sold by the bankruptcy trustee to repay their creditors. While the Texas bankruptcy exemptions are generous, some types of assets are considered non-exempt. This means that the trustee can seize and sell them as a part of the bankruptcy process. People who want to protect their non-exempt assets could choose to file Chapter 13 bankruptcy instead as long as they qualify and have sufficient income.
Non-exempt assets in Texas
Texas allows debtors to choose either the state’s exemptions or the federal exemptions. Exempt property includes assets that cannot be seized and sold by the trustee. Assets that do not fall under an exemption are non-exempt assets and might be sold by the trustee to repay a portion of the debts owed to the creditors. Some examples of non-exempt assets in Texas include the following:
- Second homes
- Second vehicles
- Investments not included in retirement accounts or pensions
- Personal property exceeding $50,000 if single or $100,000 if married
Protecting non-exempt assets through Chapter 13
While non-exempt assets can be seized and sold in Chapter 7 bankruptcy, Chapter 13 does not involve selling non-exempt assets. Instead, qualifying debtors enter into repayment plans lasting from three to five years. During this time, they repay a portion of their unsecured debts and all of their priority debts. If they successfully complete their plans, their remaining unsecured debt balances will be discharged.
When people are facing overwhelming debt, they might want to consult with experienced bankruptcy lawyers to determine whether Chapter 7 or Chapter 13 bankruptcy makes the most sense for their financial situation. Either type of bankruptcy might help debtors enjoy a fresh financial start.