Texas Bankruptcy Laws - RE Exempt From Seizure

§ 41.001. INTERESTS IN LAND EXEMPT FROM SEIZURE.; (a) Homesteads and one or more lots used for a place of burial of the dead are exempt from seizure for the claims of creditors except for encumbrances properly fixed on homestead property. (b) Encumbrances may be properly fixed on homestead property for: (1) purchase money; (2) taxes on the property; (3) work and material used in constructing improvements on the property if contracted for in writing as provided by Sections 53.254(a), (b), and (c), or otherwise authorized by Texas bankruptcy laws; (4) an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding; (5) the refinance of a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the homestead is a family homestead, or from the tax debt of the owner according to Texas bankruptcy laws; (6) an extension of credit that meets the requirements of Section 50(a)(6), Article XVI, Texas Constitution; or (7) a reverse mortgage that meets the requirements of Sections 50(k)-(p), Article XVI, Texas Constitution. (c) The homestead claimant's proceeds of a sale of a homestead are not subject to seizure for a creditor's claim for six months after the date of sale.

Application of Texas Bankruptcy Laws Under the Code:

In practice, occupation of a home requires a physical presence of the debtor on a regular basis. Problems arise in Texas bankruptcy cases because of multiple tracts, absence from the state, and divorce proceedings which fracture the application of domicile rules. Clarifying both domicile and residency through a written designation prevents surprises. If the validity of a homestead exemption is in question, written agreements and designation provide many debtors with a solution. Note: Absence from the country because of military service can not form the sole basis of abandonment.

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.

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