The Special Texas Homestead Exemption in Bankruptcy

Texas has a very different and very generous homestead exemption compared to most other states. Most homestead exemptions—in other states and in federal law—impose a specific dollar limit on the how much value in a home you can protect. There no such limit in Texas. Our homestead exemption does have some other kinds of limits and conditions, but they are relatively generous.

The Purpose of the Homestead Exemption

The homestead exemption protects your home from your creditors, more specifically it protects the equity in your home—the value of the property over and beyond the amount of the liens against it. The exemption protects that equity against your creditors, specifically against those creditors which do not have a lien—a property right—against your home. The homestead exemption does not protect you from your mortgage holder, or other lien holders except in very limited circumstances.

The Texas homestead exemption protects ALL the equity in your home, no matter how much, as long as it is your primary residence, within the limits stated below.

The Acreage Limits of the Homestead Exemption

Texas exemption law shields a certain amount of acreage, depending on the location of your home. If it is in a city, town, or village, the total property size can’t be more than 10 acres. For a home located anywhere else, the amount of acreage depends on whether it is occupied by a single unmarried adult or by a family. For a single person, the maximum is 100 acres; for a family, 200 acres. In the urban setting, the property can cover more than one lot but they must be contiguous—all connected. In the rural setting the parcels can be separate—not connected. (
Section 41.002 of the Texas Property Code
.) All buildings and other improvements that are attached to the allowed acreage are also covered by the homestead exemption.

You are allowed to temporarily rent out your homestead while it continues to be protected under your exemption as long as you do not replace it with another homestead. (
Section 41.003

Declaring Your Homestead

Texas is different from many other states in that you are required to declare your homestead exemption and do so before filing bankruptcy. You complete a form called an “
Application for Residence Homestead Exemption
” and file it with the appraisal district for the county of your homestead.

Relevance of Federal Bankruptcy Law

Bankruptcy is federal law, although it allows state law to apply in many ways. Property exemptions are one example. There is a complete set of federal property exemptions, and each state has its own set. In Texas a debtor is allowed to choose between using either those federal exemptions or the state exemptions. At least as to the homestead exemption, in just about every situation the Texas exemption is more generous than the federal one. But you can’t pick and choose among the federal and state exemptions for different kinds of property, so be sure to talk to an experienced Texas bankruptcy attorney about which set is better for you overall.

Federal law also determines who may use the Texas homestead exemption for bankruptcy purposes. You must have been a resident of Texas for two full years before filing your bankruptcy case. Otherwise, you must use the homestead exemption of the state where lived before. There’s a very good chance that exemption will be less generous—although it may be adequate. Some state’s laws only protect property within that state, so this is unquestionably an area that you need experienced legal advice.

Bankruptcy attorney Carrie Weir, in Rockwall, Texas has more than 20 years of experience handling legal issues involving personal finance, including bankruptcy. Contact her to set up a free initial consultation. Use the
contact form here
or call me at
to arrange a private meeting. I represent clients in Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, Rowlett, and the surrounding areas.

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