Understanding the Homestead Exemption


One of the biggest concerns individuals considering bankruptcy have is whether they will lose their homes after filing. No one wants to lose his or her home but facing thousands in debt can make that fear a very real possibility. It is for this reason that the homestead exemption exists. It is important that a debtor understands what is involved with the exemption before using it.

What Are Bankruptcy Exemptions?

Exemptions are laws that allow a debtor filing for bankruptcy to keep certain property, including real and personal property, and protect it from creditors. A debtor may choose to exempt any property that falls within one of the exemption categories in the state or federal bankruptcy law. Certain states require the debtor to use the state exemptions over federal, while others allow debtors to choose state or federal exemption law. Debtors filing for bankruptcy in Texas are given the choice of using the federal exemption statutes instead of Texas ones.

Each exemption type has its own advantages and disadvantages. Therefore, it is important to discuss this matter with a bankruptcy attorney before the debtor makes a selection. Once the debtor chooses to use the state exemptions over the federal, he or she must stay with that selection.

Texas Homestead Exemption

Generally, the homestead exemption in Texas is considered relatively generous, allowing homeowners to exempt an unlimited amount of equity in their property that is covered under the exemption. While the Texas homestead exemption has no limitation in terms of value, it does have acreage limitations based on the property's location.

If the homestead is an urban one and is located in a city, town, or village, the exempted property cannot be more than ten acres. If the homestead is a rural one, the property cannot exceed more than 100 acres, unless the rural homestead is already occupied by a family. If it is occupied by a family, it cannot be more than 200 acres.

Understanding the Scope of the Texas Homestead Exemption

While the homestead exemption applies to the actual structural residence, does it also cover any improvements that are external or attached to the home? In Texas, improvements like a swimming pool, bar, pumps, or water tower, are considered to be part of the primary residence and will be considered part of the homestead exemption.

Another important aspect is that if the debtor temporarily rents out the home to another person or family, this does not change the homestead character if the debtor has not already purchased and claimed another property under the homestead exemption. Another interesting fact about the scope of the Texas homestead exemption is that the state allows an unlimited homestead exemption for the debtor’s burial plot.

Requirements for Using the Texas Homestead Exemption

While no limit exists for how much can be claimed per the homestead exemption, a domicile requirement does exist. In order to use the full value of the homestead exemption, the debtor must have bought and owned the property for at least 1,215 days before filing for bankruptcy. If the debtor has not lived in the home for that long, he or she will be limited by federal law.

The Federal Homestead Exemption

The federal homestead exemption is based on federal law and the amount of the federal bankruptcy homestead exemption is adjusted every three years. This exemption can be used for homes, condominiums, co-ops, mobile homes, or burial plots. If a married couple is filing for bankruptcy, they may double the amount of the homestead exemption. The debtor should be aware, however, that the federal homestead exemption cannot be used to protect equity in any rental or investment properties. The debtor must actually reside in the dwelling to use the exemption.

Contact an Arlington Bankruptcy Attorney for a Free Consultation Today

An experienced Texas bankruptcy lawyer can help you with any questions you may have about maximizing exemption protections for your homestead. Call the Law Office of Marilyn D. Garner NOW at (817) 505-1499 for a free consultation to discuss how bankruptcy may help you.

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