Texas Bankruptcy Laws - Insurance and Retirement Funds

§ 42.0021. ADDITIONAL EXEMPTION FOR RETIREMENT PLAN. (a) In addition to the exemption prescribed by Section 42.001, a person's right to the assets held in or to receive payments, whether vested or not, under any stock bonus, pension, profit-sharing, or similar plan, including a retirement plan for self-employed individuals, and under any annuity or similar contract purchased with assets distributed from that type of plan, and under any retirement annuity or account described by Section 403(b) or 408A of the Internal Revenue Code of 1986, and under any individual retirement account or any individual retirement annuity, including a simplified employee pension plan as defined by Texas bankruptcy laws, is exempt from attachment, execution, and seizure for the satisfaction of debts unless the plan, contract, or account does not qualify under the applicable provisions of the Internal Revenue Code of 1986. In Texas bankruptcy, a person's right to the assets held in or to receive payments, whether vested or not, under a government or church plan or contract is also exempt unless the plan or contract does not qualify under the definition of a government or church plan under the applicable provisions of the federal Employee Retirement Income Security Act of 1974 or Texas bankruptcy laws. If this subsection is held invalid or preempted by federal law in whole or in part or in certain circumstances, the subsection remains in effect in all other respects to the maximum extent permitted by law.

Application of Texas Bankruptcy Laws Under the Code:

According to 11 U.S.C. 522(l) "The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section. If the debtor does not file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estate on behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list is exempt." The trustee, creditors, an interested party, or the Texas bankruptcy court upon it's own motion, may file an objection to exemptions designated within a debtor's schedule. Denial requires notice to debtors and hearing.

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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