Texas Bankruptcy Exemptions
New Federal law preempts Texas bankruptcy exemptions and homestead Allowance
All state residents are allowed an election between the Federal list or the Texas bankruptcy exemption list, both of which are statutorily created. The amounts and values of exemptions change fairly often, such as the automatic adjustment of federal values according to fluctuations in the consumer price index. The amount of the Texas homestead allowance recently received national attention because of a new federal law that preempted centuries old Texas traditions. Previously, Texas residents could claim unlimited value for their homestead, restricted only by an acreage limitation. Today, federal law prohibits enforcement of Texas law and established guarantees contained in the Texas Constitution, and imposes a maximum limit on value for all homestead exemptions.
Why the Texas homestead exemption limit changed
The Abuse Prevention Act established new bankruptcy laws in all states, but Texas was hit hard. In Texas, according to the GENII index, the disparity in income earned by the top 20% of state residents over the bottom 80% is growing at an alarming rate. When comparing Texas resident income to all other states, the bottom 80% bracket is ranked 3rd lowest in the country. Beware, federal assistance vanished. New qualification standards for Chapter 7 are tied to state median income.