Texas Bankruptcy Laws - Homestead Exemption Value

Texas Constitution - Article 16, Section 51 - The homestead, not in a town or city, shall consist of not more than two hundred acres of land, which may be in one or more parcels, with the improvements thereon; the homestead in a city, town or village, shall consist of lot or contiguous lots amounting to not more than 10 acres of land, together with any improvements on the land; provided, that the homestead in a city, town, or village shall be used for the purposes of a home, or as both an urban home and a place to exercise a calling or business, of the homestead claimant, whether a single adult person, or the head of a family; provided also, that any temporary renting of the homestead shall not change the character of the same, when no other homestead has been acquired; provided further that a release or refinance of an existing lien against a homestead as to a part of the homestead does not create an additional burden on the part of the homestead property that is unreleased or subject to the refinance, and a new lien is not invalid only for that reason.

Application of Texas Bankruptcy Laws Under the Code:

Notice that the value of real estate is not specifically mentioned by the clause above. Texas bankruptcy laws are unique, as one of the two states that do not limit the value of real estate protected from the execution of judgments obtained by creditors. Currently, legislation is now pending before the U.S. House and Senate that would preempt Texas bankruptcy laws and create dollar amount restrictions. Value in Texas bankruptcy courts is determined based upon the fair market price, less amounts owed. "Fair market" is not a retail value expected by professional sellers or advertisers. Likewise, forced liquidation values are not representative of a fair market. The value of property is an estimate of an agreement reached between a willing buyer and a willing seller under current market conditions. Creditors may file objections to the calculation of equity which may be subject to disbursement.

Because of the unlimited homestead exemption, Texas bankruptcy laws are unique within all states. Be aware however, effective as of October 17, 2005, federal preemption limits the availability of exempt value in Chapter 7 and 13. The effect of preemption is to replace existing Texas statutes with the federal statute which provides less protection for debtors.

See also, Federal Exemptions

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