As a Dallas bankruptcy lawyer, I help people resolve their debts and protect their assets through bankruptcy every day. When it comes to asset protection, there are two ways your personal property could be protected in bankruptcy. Federal bankruptcy exemptions offer basic asset protection for anyone in the United States filing for bankruptcy, while state bankruptcy exemption laws offer a wider base  of protection for those who qualify.

State vs. Federal Exemptions

Each state offers their own bankruptcy exemption laws, which can vary quite a bit from state to state. In general, Texas is one of the more lenient states when it comes to asset exemption.  While Federal exemption laws offer basic asset protection, Texas bankruptcy laws offer consumers more protection at a higher declared value, meaning debtors filing bankruptcy in Texas can protect more of their property than debtors in many other states.

The Homestead Exemption

Protecting one’s home is typically the biggest asset of concern in a bankruptcy case. The Federal homestead exemption is limited to $125,000; whereas the Texas exemption allows for protection of a home to an unlimited dollar amount. However, there are some restrictions with the Texas bankruptcy homestead exemption. The property must be less than 1 acre if it is located within the city limit, or less than 200 acres outside city limits. The filer must be a resident of Texas for at least two years prior to the filing and not be suspected of fraud.

Personal Property Exemption

Another point of concern is whether personal property is protected from liquidation in bankruptcy. Personal property includes, but is not limited to, items such as furniture, clothing, jewelry, motor vehicles and tools. Federal exemption laws allow for $10,775 worth of personal property to be claimed, while Texas allows of up to $30,000 for an individual and $60,000 for a family. However, jewelry is limited to 25% of the total property allowance and only one car per licensed member of the family is allowed to be exempt.

While federal and state exemption laws vary quite a bit, both offer equal protection of pension benefits, retirement funds, survivor benefits and others.