Texas Bankruptcy Exemptions and Law

Debt can arise for various reasons. It can result from job loss, medical bills, divorce, or a business downturn. These events can leave the family struggling to keep up with payments. Filing for bankruptcy stops creditor actions such as wage garnishment, foreclosure, or repossession. If you’re considering bankruptcy in Texas, a Texas bankruptcy attorney can explain your options and help you protect what matters most.

Should You File Bankruptcy in the Lone Star State?

Throughout the 2010s, federal courts and government bureaucrats eliminated many consumer debt protections. In Midland Funding v. Johnson, a controversial 2017 Supreme Court decision, the Court ruled that filing a proof of claim on a time-barred debt in bankruptcy does not violate the Fair Debt Collection Practices Act. Critics argue this ruling left consumers with less protection against stale debt-collection attempts in bankruptcy proceedings.

Because of these changes, families are likely to find themselves in debt after issues like job loss, divorce or separation, business downturn, and serious injury or illness. Bankruptcy offers families a chance at a financial fresh start. It not only stops creditor adverse actions, but also provides relief from debt and the ability to discharge debts permanently. It can also eliminate the debt delinquency that caused the problems in the first place.

While there’s a common fear that filing for bankruptcy means losing everything you own, that’s rarely the case. Texas has some of the broadest bankruptcy exemptions in the country to help protect your assets. A Texas bankruptcy lawyer can show you how to maximize these exemptions.

Texas and Federal Bankruptcy Law

Both the federal government and Texas have regulations covering bankruptcy. The Bankruptcy Code governs most of the bankruptcy process at the federal level. Texas also has its own bankruptcy laws, particularly regarding property exemptions. Most of Texas’s bankruptcy laws are in Section 41 of the Texas Property Code.

Texas Bankruptcy Exemptions

Filing bankruptcy in Texas doesn’t mean you’re guaranteed to lose your home and everything else you own. Exemptions are in place to permit you to keep as many of your assets as possible, including your primary dwelling.

What Is an Exemption?

For most people, a home is the largest purchase they’ll make in their life. Many also contribute to retirement accounts and rely on government benefits, such as VA disability benefits. If filing bankruptcy meant losing these things, the cure for financial problems would be worse than the disease. Both federal and state laws protect assets in bankruptcy, even if creditors find some way around the automatic stay.

In addition, Texas allows debtors to choose between state and federal exemptions when filing for bankruptcy. This means they can choose the exemptions that offer the best coverage.

What are the State Exemption Laws in Texas?

Despite best intentions, people can fall behind on mortgage payments because of circumstances beyond their control. People in this situation should consider filing for bankruptcy and using state exemptions. The automatic stay stops foreclosure proceedings dead in their tracks. As for property exemptions, a Texas debtor can protect the following:

• Home equity: Texas is one of the only states in the Union with an unlimited homestead exemption. The exemption covers urban property up to 10 acres and rural property up to 100 acres for a single person or 200 acres for a family. This exemption includes improvements like a swimming pool. To use Texas exemptions, a filer must have lived in Texas for at least 730 days before filing for bankruptcy. A separate federal law may cap the homestead exemption at $214,000 if the debtor acquired a homestead interest within the 1,215 days before their bankruptcy filing.
• Motor vehicle: Texas law exempts the full value of one motor vehicle for each family member or single adult who holds a driver’s license. If a household member lacks a license but relies on a vehicle operated on their behalf, that vehicle may also qualify. This is common for people with disabilities. Vehicle value counts toward the overall personal property exemption cap described below.
• Personal property: The Texas Property Code allows single filers to exempt up to $50,000 worth of furniture, firearms, jewelry, clothing, and other personal property. The cap applies to the aggregate fair market value of the items, exclusive of any liens or security interests. Used furniture, electronics, and appliances typically have very little fair market value.
• Retirement accounts: Defined contribution plans like IRAs, 401(k)s, and Defined Benefit Plans (such as pension plans and teacher retirement plans) are also 100% exempt. This keeps money earmarked for retirement beyond the reach of creditors.

For families, including married couples filing together, the personal property exemption cap is $100,000 in aggregate fair market value.

Can I Claim Federal Bankruptcy Exemptions in Texas?

You can choose between state and federal exemptions in Texas. In many cases, the federal exemptions are preferable to state exemptions.

With no home equity to protect and a need to shield savings, federal exemptions might be the better fit for renters and those with cash in bank accounts. These exemptions are:

• Home equity: Bankruptcy filers who claim federal exemptions may protect up to $31,575 in home equity (as of April 1, 2025). A debtor whose equity falls below that threshold keeps their home out of the bankruptcy estate. The as-is cash value rule, which applies to personal property, also applies to real property. A home’s as-is cash value may be only a fraction of its fair market value.
• Motor vehicle: The federal motor vehicle exemption is $5,025 (as of April 1, 2025). This exemption could apply to one vehicle or be spread over several vehicles. It’s rare to have much equity in a new car or truck. Used vehicles might be paid off, but often have little to no value.
• Personal property: Much like the state exemptions, federal exemptions allow debtors to protect home furnishings, clothes, life insurance benefits, and other personal property below a certain value. These values change periodically. The aggregate is generally around $16,850 for household goods, with some items such as medical devices carrying no value limitation.
• Retirement accounts: The law on this point is somewhat unsettled. ERISA-qualified plans, such as 401(k)s, are generally fully exempt with no dollar cap. Traditional and Roth IRAs are subject to a combined limit, which adjusts periodically. For cases filed on or after April 1, 2025, that limit is $1,711,975. Inherited IRAs are treated differently.
• Government and FSO benefits: FSOs, or Family Support Obligations, include alimony and child support. Government benefits usually include Social Security, unemployment, disability, or medical benefits (i.e. Medicare or Medicaid). For bankruptcy purposes, they are assets. They are also 100% exempt, regardless of their financial value.
• Wildcard exemption: Federal law allows debtors to exempt up to $1,675 in otherwise nonexempt property, plus up to $15,800 of any unused portion of the homestead exemption, for a potential total of around $17,475 (as of April 1, 2025). This flexibility makes the federal wildcard useful for renters or others who have little or no home equity to protect. The wildcard can cover cash, a vehicle with higher-than-usual equity, or any other property that doesn’t fit neatly into another exemption category.

Most people don’t fit neatly into federal or state exemption categories. For example, someone might own a home and also be collecting support payments from a former spouse. A bankruptcy attorney can best evaluate these cases and recommend a course of action.

How Do I Start Bankruptcy in Texas?

Filing bankruptcy requires a petition and schedules. You can file without an attorney and find common bankruptcy forms online. However, the petition and schedules are voluminous. They are much more complex and detailed than a tax return. In addition, do-it-yourself filers are completely on their own. The court won’t tell them what to expect at a 341 meeting or how to argue their cases.

A bankruptcy petition preparer helps debtors fill out the forms, but offers no other assistance. They can’t give you legal advice or represent you in court.

A professional relationship with a Texas bankruptcy attorney is the best filing option. A lawyer can explain the differences between Chapter 7 and Chapter 13, help you decide which type to file, and handle the complicated paperwork. They can also represent you at the critical 341 meetings and stand with you at any other required court appearances.

Where Do I File for Bankruptcy in Texas?

Texas has four bankruptcy court districts: the Northern, Southern, Eastern, and Western. Each district has several locations. In general, people in or near Dallas, Fort Worth, Amarillo, or Lubbock file in the Northern District. Those in or near Houston, San Antonio, Corpus Christi, or Brownsville typically file in the Southern District. People near Tyler, Beaumont, or Texarkana are generally in the Eastern District. Everyone else is likely in the Western District, which includes Austin and El Paso.

How Much Does Bankruptcy Cost in Texas?

The filing fee is $338 for a Chapter 7 case, and $313 for a Chapter 13 case, per the federal court fee schedule. Some debtors can pay filing fees in installments. Others are eligible for fee waivers.

Bankruptcy professional fees, as well as payment methods, also vary by area. Most bankruptcy petition preparers require full payment up front before filing. Chapter 7 Texas bankruptcy lawyers usually offer partial payment plans. A Chapter 13 bankruptcy attorney in Texas often offers a whole payment plan. In the monthly repayment plan, debtors typically include professional fees. 

Am I Eligible to File Bankruptcy in Texas?

All bankruptcy debtors must complete a pre-filing credit counseling course and a post-filing debt management course. Those claiming Texas exemptions must be long-term Texas residents. Federal exemptions also have residency requirements, but they’re often only a few weeks.

Chapter 7 Qualifications

Bankruptcy filers must meet the official and unofficial qualifications that are unique to a so-called “liquidation bankruptcy.” In most instances, people with crippling unsecured debts, such as medical bills and credit card debt, opt for Chapter 7.

The official qualification is the means test. The average income of a Chapter 7 bankruptcy filer must be below the state average. As of November 2025, the annual income threshold for a family of four is approximately $114,938. Figures are updated regularly by the U.S. Trustee Program, so confirm current numbers before filing.

Chapter 7’s informal qualification, which varies by jurisdiction, focuses on Schedules I and J. These schedules declare the debtor’s monthly income and expenses. Unless your expenses exceed your income, the trustee may require you to file Chapter 13 instead.

Chapter 13 Qualifications

Unlike Chapter 7, Chapter 13 is designed to allow debtors to pay off most or all of their debts. People with delinquent secured debts, such as past-due mortgage payments, file Chapter 13 bankruptcy for debt reorganization.

These debtors cannot exceed certain debt ceilings. As of April 1, 2025, Chapter 13 debtors cannot have more than $1,580,125 in secured debt or $526,700 in unsecured debt. These figures include both current and delinquent obligations.

For Chapter 13, debtors must show they can afford to make a monthly debt consolidation payment. If so, they pay the trustee, who then distributes it to the creditors. The payment amount varies by case. Chapter 13 bankruptcies last between three and five years and carry less of a negative effect on a credit report than Chapter 7.

Connect With an Experienced Attorney

If you need help in filing your bankruptcy case, a Texas bankruptcy lawyer can assist you. They’ll use federal and Texas law to protect your home and preserve as many of your assets as possible.

Tax statutes are always subject to change through new laws and court rulings. Although we strive to provide the most recent information available, it’s a good idea to consult an attorney near you for the best outcome in a bankruptcy filing.