Can They Take My Belongings If I File Chapter 13 in Texas?

Chapter 13 bankruptcy protects your rights to your property. Your property's ownership vests back to you once your Chapter 13 plan is confirmed. If you have any nonexempt property, you must pay your unsecured creditors that amount over the life of the plan. In Texas, you can choose either the federal exemptions or the exemptions set forth in the Texas Property Code.

The Chapter 13 Estate

The bankruptcy estate is different in a Chapter 13 than in a Chapter 7. In a Chapter 7, all the property you own at the time you file your case becomes bankruptcy estate property, and you must exempt that property in order to keep it. Your property also becomes estate property when you file a Chapter 13, but property ownership returns to you when the court confirms your Chapter 13 plan. Chapter 13 protects your property in that regard. Your exemptions in a Chapter 13 determine how much you must pay your creditors, unlike Chapter 7 exemptions, which determine whether you can keep your belongings.

Federal Exemptions: Bankruptcy Code Section 522

The Bankruptcy Code provides that you may exempt certain property from the bankruptcy estate. Section 522 lists the property you can keep up to a certain dollar amount. For example, as of January 2011, you can protect up to $21,625 in equity in your residence, and you can protect up to $3,450 of the value of one motor vehicle. Section 522 also has exemptions for tools, books, furniture, retirement accounts, wages, unemployment benefits and other property.

Election of Exemptions

Bankruptcy Code Section 522 provides that you can choose to use exemptions in your state's laws instead of the exemptions listed in the Bankruptcy Code. Although some states do not have exemption laws, Texas has its own exemption statute.

Texas Exemptions: Texas Property Code

The Texas Property Code allows you to exempt your residence from the bankruptcy estate, regardless of its value. The Texas Property Code also allows you to keep up to $30,000 in any other types of property if you are single or $60,000 if you have a family. The Texas Property Code also has exemptions for wages, college savings plans, retirement savings and your right to receive domestic support.

Exemptions and the Chapter 13 Plan

A Chapter 13 bankruptcy trustee does not collect and sell property. A Chapter 13 can protect your property that a trustee might otherwise sell in a Chapter 7 case. Any nonexempt property in a Chapter 13 case is used only to calculate the amount you must pay to unsecured creditors in your Chapter 13 plan. For example, if you have $100,000 worth of property and you are able to exempt $80,000 of that value, you must pay $20,000 to unsecured creditors over the life of the plan, which is three to five years.

References

• American Bankruptcy Institute: U.S. Code, Title 11, Section 541
• American Bankruptcy Institute: U.S. Code, Title 11, Section 522
• American Bankruptcy Institute: U.S. Code, Title 11, Section 1322
• American Bankruptcy Institute: U.S. Code, Title 11, Section 1325
• Texas Property Code: Section 41.001--Interests in Land Exempt from Seizure
• Texas Property Code: 42.001--Personal Property Exemption

Resources

• Texas Property Code: 42.0021--Additional Exemption for Certain Savings Plans
• Texas Property Code: Section 42.0022--Exemption for College Savings Plans