The Texas homestead exemption is available to certain Texas residents who file for bankruptcy.  If you qualify for this exemption, you will be allowed to exempt your home from creditors during the bankruptcy process.  Texas has one of the most generous state homestead exemption laws.  Of course, there are certain criteria that must be met. Let’s begin by looking at the guidelines for the Texas homestead exemption.

If you qualify, the Texas homestead exemption has an unlimited dollar amount that can be excluded from bankruptcy.  If your homestead is located in a city, town, or village, the property cannot exceed 1 acre.  For property located outside of a city, town, or village, the exemption is limited to 200 acres per family.  To qualify, you must have lived in Texas for the past two years before filing for bankruptcy.

If you do not qualify for the Texas homestead exemption, you can use the federal homestead exemption which is limited to $125,000.  By law, you are required to use the federal homestead exemption if you purchased the property within 1215 days (3.3 years) prior to filing for bankruptcy.  You may also be forced to use the $125,000 federal limit if you are convicted of felony abuse of bankruptcy laws.  Likewise, the federal exemption limit will be imposed if the debts you owe were caused by racketeering, violating securities law, or intentional crimes that resulted in death or bodily injury in the past 5 years prior to filing for bankruptcy.

Even if you fall into a disqualifying category, you might be able to qualify for the Texas homestead exemption (the state exemption) if the property is deemed as “necessary for the support of the debtor and his dependents.”  It’s important to note that the bankruptcy court can reduce the value of your homestead exemption if it is determined that you added value to the property with the intent to delay, hinder, or defraud creditors during the 10-year period prior to filing for bankruptcy.