Exemptions are, in essence, what assets are protected in a bankruptcy proceeding. Exempted property is property that the debtor is allowed to keep. The federal government exempts a number of different types of property.  The following list is only a partial listing of Federal and State exemptions. In other words it is NOT all-inclusive.

Partial Listing Of Federal & State Exemptions:

The Texas homestead exemptions include the following items:

An urban homestead consisting of the home or business, consisting of not more than the improvements and the 10 acres of land along with it; or if you live in a rural area, a rural homestead of up to 200 acres.

A family is allowed personal property of an aggregate fair market value of not more than $60,000.00, or if the property is owned by a single adult not more than $30,000.00, in the following items of personal property:

a)      The following personal property:

         1)    home furnishings, including family heirlooms;

         2)    provisions for consumption;

         3)    farming or ranching vehicles and implements;

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

         5)   wearing apparel;

         6)   jewelry not to exceed 25 percent of the aggregate limitations ($60,000 or $30,000 as the case may be);

         7)   two firearms;

         8)   athletic and sporting equipment, including bicycles;

         9)   a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of a family or  single adult who holds a driver’s license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of the non-licensed person;

       10)   the following animals and forage on hand for their consumption:

               A)    two horses, mules, or donkeys and a saddle, blanket, and bridle for each;

               B)    12 head of cattle;

               C)    60 head of other types of livestock; and

               D)    120 fowl; and

       11)  household pets.

In addition, the following personal property is exempt regardless of amount:

      1.    Current wages for personal services, except for enforcement of court order child support
             payments;

      2.    Professionally prescribed health aides of a debtor or a dependent of a debt; and

      3.    Alimony, support, or separate maintenance received or to be received by the debtor for the              support of the debtor or dependent of the debtor.

Please keep in mind that these exemptions do not apply to the seizure by a secured creditor with a contractual landlord’s lien or other security interest in the property.  In other words, if you fail to pay the rent on your home or apartment, the landlord can seize your property. 

In addition, unpaid commissions for personal services not to exceed 25% of $60,000 for a family and $30,000.00 for a single adult are exempt from seizure.

Most retirement plans that are qualified plans under the Internal Revenue Code, including IRAs, are exempt, regardless of the amount contained in the plan. This would include stock bonus, pension, profit sharing or similar plans including retirement plans for self-employed individuals and any annuities or similar contracts, and any individual retirement account or retirement annuity or simplified employee pension plan. A person’s right to assets held in a government or church plan or contract is also exempt, if it qualifies under the applicable definitions of the Employee Retirement Security Act of 1974. Contributions to an individual retirement account that exceed the amounts deductible under the Internal Revenue Code are nonexempt, unless otherwise exempt by law. Nontaxable “roll-over” contributions under certain sections of the Internal Revenue Code are exempt.

The federal exemptions consist of the following items:

     1.    The debtor’s total interest up to $17,425 in value in property used as a residence of the debtor or a dependent. The residence may be either personal or real property.  Accordingly, a mobile home, condominium apartment, or shares in a cooperative that owns a residence qualifies for this exemption. Burial plots also qualify for this exemption.

     2.    The debtor’s interest up to $2,775 in value in one motor vehicle.

     3.    The debtor’s interest in all household goods and furnishings, wearing apparel, appliances, books,  animals, crops, or musical instruments held primarily for personal or family use by the debtor or a       dependent. The exemption may not, however, exceed $450 in value in any particular item. This             exemption may not exceed $9,300 in aggregate value.

     4.    An interest in jewelry held by the debtor or a dependent for personal or family use. The total       value of this exemption may not exceed $1750.

     5.    In addition to all other exemptions, the debtor may claim as exempt an interest in any property,  including cash, not to exceed in value $850 plus up to $8725 of any unused portion of the residence and
burial plot exemption.

     6.    The debtor’s interest up to $1,750 in value in implements, tools, or professional books used in the  trade of the debtor or a dependent.

     7.    Any unmatured life insurance policy owned by the debtor, regardless of value or face amount, other than a credit life insurance contract. In addition, any accrued dividends, interest, or cash surrender value of any unmatured life insurance policy is exempt if the insured under the policy is  the debtor or a dependent. However, the total value of the exempt dividends, interest, or cash  surrender value may not exceed $9,300. For example, if the debtor owns a $100,000 life insurance policy that has a $10,000 loan value, the debtor may keep $9,300 of the loan value as exempt. The trustee has the right to use the remaining $700 for distribution to creditors. This  may reduce the amount of insurance, but will not deprive the debtor of the policy and will not deprive dependents of insurance protection.

     8.   Professionally prescribed health aids for the debtor or a dependent of the debtor.

     9.   Many governmental benefits are exempt regardless of value. The debtor may claim as exempt a  Social Security benefit, unemployment compensation, or a local public assistance benefit. A veteran’s benefit, as well as a disability, illness, or unemployment benefit, qualifies as exempt property.

    10.  Certain rights to receive income are exempt, but only to the extent that they are reasonably
necessary for the support of the debtor and any dependent. This exemption applies to alimony, support or maintenance payments. It also applies to payment under a stock bonus, pension, profit sharing, annuity, or similar plan on account of illness, disability, death, age, or length of service. However, payment under a retirement plan is not exempt if the plan was established by or under the auspices of an insider who employed the debtor at the time the debtor’s rights in the plan arose, payment is on account of age or length of service, and the retirement plan does not qualify for certain deferred tax benefits.

   11.  The debtor’s rights to receive several other types of payments are exempt. Included in this            category are crime victim compensation awards without limitation. If the debtor was dependent on another person who is deceased, the debtor’s rights to life insurance proceeds and wrongful death payments relating to the decedent are exempt to the extent reasonably necessary for support. If the debtor
suffered personal bodily injury, payments arising from the injury are exempt up to $17,425, but this exemption does not cover awards or settlements for pain and suffering, loss of past wages, medical expenses, or other pecuniary loss. However, to the extent necessary for support, payments for the loss of future earnings are exempt. All of the exemptions mentioned in this paragraph apply to any property traceable to the proceeds of the payments, as well as to the actual payments. Thus, if a debtor receives a $10,000 crime victim compensation award and purchases a new boat, the boat would qualify for this exemption.

Notice that there are monetary limitations on several of the bankruptcy exemptions. It is important to emphasize that these limits apply to the debtor’s equity in the property. In essence, if the debtor’s equity above liens and mortgages exceeds the monetary exemption limit, a chapter 7 trustee may liquidate the property for the purpose of realizing the excess value for the estate.