Exemptions in Bankruptcy

 Most consumer debtors keep all of their property because of “exemption laws.” There are two set of exemption laws, one prescribed by federal law, and the second prescribed by Texas state law. These laws permit a debtor to keep a specified amount of property.

Property Description

Federal

Texas

Residence & Burial Plots

Single

Joint

Single

Family

$21,625

$43,250

10 / 100 acres

10 / 200 acres

property location is irrelevant

urban / rural

urban / rural

exemption calculation is based on equity amount – market value less all mortgages, liens and other encumbrances

property value is unlimited – property can be worth 100 million dollars without defeating the exemption

land and mobile homes

land and mobile homes (mobile homes allowed only if attached to the land – not on wheels)

must currently reside on the property to claim the exemption

need not currently reside on the property; temporary renting or absence does not defeat exemption

 includes property owned by the debtor or a dependent

limited to property owned by the debtor

11 U.S.C. § 522(d)(1)

Texas Property Code § 41.001(a) (exemption) and § 41.002 (definition & acreage limit)

Wildcard

 

Federal

Texas

Single

Joint

Single

$11,975 (max.)

$23,950 (max.)

$0

$0

$1,150 (individual cases) or $2,300 (joint cases) plus up to $10,825 (individual cases) or $21,650 (joint cases) of the unused homestead exemption

no similar catchall exemption exists under Texas state law; all cash and investments (unless in a retirement account) or other property not otherwise exempt is not protected

11 U.S.C. § 522(d)(5)

no citation

Motor Vehicles

 

Federal

Texas

Single

Joint

Single

$3,450

$6,900

$30,000

$60,000

joint cases: exemption is limited to $3,450 for each debtor; can not apply any excess or unused portion of the exemption to a 2nd vehicle

a 2, 3 or 4 wheeled motor vehicle for each family member who holds a driver’s license or who relies on another person to operate the vehicle

11 U.S.C. § 522(d)(2)

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(9) (vehicles)

Household Furnishings & Personal Effects

 

Federal

Texas

Single

$11,525

$23,050

$30,000

$60,000

cumulative limits include the total amounts claimed for wearing apparel and animals

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

value limitation of $600 for any single item

no value limitation on individual items

exemption applies to: household furnishings, household goods, appliances, books, crops, or musical instruments;

exemption applies only to household furnishings and “family heirlooms” (not defined by statute); exemption does not include household goods, appliances, books, crops or musical instruments

limited to property held for personal, family or household use

no personal, family or household use limitation

includes property owned by the debtor or a dependent

limited to property owned by the debtor

11 U.S.C. § 522(d)(3)

Texas Property Code § 42.001(a)(1) (value limit), § 42.002(a)(1) (home furnishings) and § 42.002(a)(2) (food)

Wearing Apparel

 

Federal

Texas

Single

Joint

Single

Family

$11,525

$23,050

$30,000

$60,000

cumulative limits include the total amounts claimed for household furnishings, personal effects and animals

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

value limitation of $600 for any single item

no value limitation on individual items

includes property owned by the debtor or a dependent

limited to property owned by the debtor

applies only to  property held for personal, family or household use

no personal, family or household use limitation

11 U.S.C. § 522(d)(3)

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(5) (wearing apparel)

Animals

 

Federal

Texas

Single

Joint

Single

Family

$11,525

$23,050

$30,000

$60,000

animals only – exemption does not include animal food or supplies animals and food for their consumption – exemption does not include supplies

cumulative limits include the total amounts claimed for household furnishings, personal effects and animals

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

value limitation of $600 for any single item

no value limitation on individual items

no limit on number or type of animals

limited to: (1) two horses, mules, or donkeys & saddle, blanket & bridle for each; (2) 12 head of cattle; (3) 60 head of other types of livestock; (4) 120 fowl; (5) all household pets

11 U.S.C. § 522(d)(3)

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(10) (animals)

Jewelry

 

Federal

Texas

Single

Joint

Single

Family

$1,450

$2,900

$7,500 *

$15,000 *

includes property owned by the debtor or a dependent

 

limited to property owned by the debtor

applies only to  property held for personal, family or household use

no personal, family or household use limitation

11 U.S.C. § 522(d)(4)

Texas Property Code § 42.002(a)(6) (value limit & jewelry)

Tools of the Trade

 

Federal

Texas

Single

Joint

Single

Family

$2,175

$4,350

$30,000

$60,000

property valued in excess of the dollar limit specified above can be protected only as part of wildcard exemption

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

includes implements, professional books and tools

includes tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession

includes property owned by the debtor or a dependent

limited to property owned by the debtor

11 U.S.C. § 522(d)(6)

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(4) (tools of trade)

Farming or Ranching Vehicles & Implements

 

Federal

Texas

Single

Joint

Single

Family

$0

$0

$30,000

$60,000

no separate exemption; but can be exempted as tools of the trade

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

no limit on number or type of items

no citation

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(3) (farming & ranching vehicles & implements)

Firearms

 

Federal

Texas

Single

Joint

Single

Family

$0

$0

$30,000

$60,000

no separate exemption; can be protected only as part of wildcard exemption

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

limit of 2 firearms; no specification on type

no citation

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(7) (two firearms)

Athletic & Sporting Equipment

 

Federal

Texas

Single

Joint

Single

Family

$0

$0

$30,000

$60,000

no separate exemption; can be protected only as part of wildcard exemption

cumulative limits include the total amounts claimed for: (1) vehicles; (2) home furnishings; (3) wearing apparel; (4) jewelry; (5) tools of trade; (6) farm & ranch vehicles & implements; (7) firearms; (8) athletic & sporting equipment; (9) animals; (10) unpaid commissions.

applies to athletic and sporting equipment, including bicycles

no citation

Texas Property Code § 42.001(a)(1) (value limit) and § 42.002(a)(8) (athletic & sporting equipment)

Commissions

 

Federal

Texas

Single

Joint

Single

Family

$0

$0

$7,500*

$15,000*

no separate exemption; can be protected only as part of wildcard exemption

 

limited to unpaid commissions for personal services

no citation

Texas Property Code § 42.001(d) (value limit & commissions)

Wages

 

Federal

Texas

Single

Joint

Single

Family

0

0

unlimited

unlimited

no separate exemption; can be protected only as part of wildcard exemption

applies to current wages for personal services except for court ordered child support

no citation

Texas Property Code § 42.001(b)(1) (wages)

Professionally Prescribed Health Aids

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

unlimited

unlimited

applies to property belonging to the debtor or any dependant of the debtor

11 U.S.C. § 522(d)(9)

Texas Property Code § 42.001(b)(2) (professionally prescribed health aids)

Social Security, Unemployment, Disability & Veterans Benefits

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

unlimited

unlimited

exemption not limited to funds necessary for reasonable support of the debtor and any dependent of the debtor

11 U.S.C. § 522(d)(10)(A)

42 U.S.C § 407

Alimony & Support Payments

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

unlimited

unlimited

applies to property belonging to the debtor or any dependant of the debtor

only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

exemption not limited to funds necessary for reasonable support of the debtor and any dependent of the debtor

11 U.S.C. § 522(d)(10)(D)

Texas Property Code § 42.001(b)(3) (alimony, support & separate maintenance)

Pension, Profit-sharing & Retirement Plans

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

unlimited

unlimited

exemption applies only to plans that qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code

contributions to IRA’s, Roth IRA’s or annuities that exceed the deductible limits under the Internal Revenue Code are not exempt.

only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

exemption not limited to funds necessary for reasonable support of the debtor and any dependent of the debtor

The assets of almost all pension and retirement plans can not be taken from a debtor because they are not considered part of the “bankruptcy estate.”  Under the U.S. Supreme Court decision in Patterson v. Shumate, all pension plans and trusts are excluded from the bankruptcy estate if the plan or trust has a provision which prevents the proceeds from being transferred or assigned, and the provision is enforceable under federal or state law.  Virtually all plans have such a provision.  Therefore, the exemption rules relating to pension plans have been rendered virtually irrelevant.

11 U.S.C. § 522(d)(10)(E)

Texas Property Code § 42.0021 (any stock bonus, pension, profit sharing or similar plan)

Death Awards & Survivor Benefits

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

unlimited

unlimited

applies to all payments traceable to a wrongful death award of persons to whom debtor was a dependant

limited to death and survivor benefits received by dependants of military personnel and U.S. Government employees, longshoremen & harbor workers and war risk hazard death or injury compensation

only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

exemption not limited to funds necessary for reasonable support of the debtor and any dependent of the debtor

11 U.S.C. § 522(d)(11)(B)

42 U.S.C § 1717

Cash Surrender Value of Life Insurance Contracts

 

Federal

Texas

Single

Joint

Single

Family

$11,525

$23,050

unlimited

unlimited

applies to policies under which the insured is the debtor or dependent

includes cash values to be paid to the insured or any beneficiary

11 U.S.C. § 522(d)(8)

Texas Insurance Code § 1108.051 (insurance and annuity benefits)

Insurance & Annuity Contract Proceeds

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

unlimited

unlimited

life insurance proceeds only

includes all insurance contracts, including annuities & structured settlements used to finance personal injury recoveries

only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

exemption not limited to funds necessary for reasonable support of the debtor and any dependent of the debtor

11 U.S.C. § 522(d)(11)(C)

Texas Insurance Code § 1108.051 (insurance and annuity benefits)

Personal Injury Recoveries

 

Federal

Texas

Single

Joint

Single

Family

$21,625

$43,250

$0

$0

limited to compensation for personal bodily injury only; no pain & suffering; includes awards made to dependants

no exemption except for annuities purchased as structured settlement of personal injury claims

11 U.S.C. § 522(d)(11)(D)

no citation

Future Earnings Compensation

 

Federal

Texas

Single

Joint

Single

Family

unlimited

unlimited

$0

$0

applies to payments in compensation of loss of future earnings

no exemption recognized under Texas state law

only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

11 U.S.C. § 522(d)(11)(E)

no citation

 * The  $7,500 / $15,000 limit for jewelry and unpaid commissions must be included within the $30,000 / $60,000 maximum limits for other personal property.  In other words, you must include jewelry and unpaid commissions when calculating  the total amount of the allowable exemptions under the $30,000 / $60,000 limits.

► MUST CHOOSE ONE EXEMPTION SCHEME (TEXAS OR FEDERAL). The debtor must choose one of the two exemption schemes.  In joint cases, the amount of the federal and state exemptions are double for most items.  However, in joint cases, both spouses must choose a single exemption scheme.  One debtor is not entitled to choose the federal exemptions, with the other debtor choosing the Texas state exemptions.

► FEDERAL EXEMPTIONS ARE NORMALLY BETTER BECAUSE OF WILDCARD EX­EMP­TION. In most cases, the debtor is better served by choosing the federal exemptions because of the wildcard exemption.  The wildcard enables the debtor to keep some cash, investments or other property that is not otherwise on the exemption list.  When using the federal exemptions, the debtor is not required to engage in pre-bankruptcy planning in an effort to empty bank accounts or sell assets that are not otherwise exempt.

► TEXAS EXEMPTIONS ARE NORMALLY BETTER ONLY TO PROTECT EX­PEN­SIVE HOMES OR VEHICLES.  The Texas exemptions are much more liberal on the homestead and vehicle exemptions.  However, most debtors do not  have a  lot of equity in their homestead or vehicles.  Therefore, the Texas exemptions are normally useful only in cases in which the debtor would completely exhaust the homestead or vehicle exemptions permitted under the  federal exemptions, or where the debtor has a large amount of equity in a mobile home (a very rare situation).