EXEMPTIONS
I get inquiries all the time from people pondering bankruptcy, getting sued by creditors, or in some cases just getting telephone harassment on some long forgotten debt.
Invariably people want to know - Can they put me in jail? On civil debt the simple answer is no. There are a small handful of exceptions but the vast majority of the time the answer is no.
Can they takeaway your homestead? No! if you can legally claim that the dwelling you live in is your homestead (subject to acreage limitations), and Texas Law is pretty broad as to what is in fact a homestead, than there are generally only a handful of people who could potentially take it away. The short list would include the mortgage lender who holds your mortgage in the event that you go into default, the Homeowners Association for nonpayment of assessments, The Internal Revenue Service, and the County Tax Assessors Office. That’s about it.
Other common exemptions are that you may exempt 1 vehicle per licensed driver per household. This would include children’s cars even though they are in the name of the parent. Obviously the IRS can seize just about anything (consult a tax professional should you have any questions there), but other than that the only creditor that can legally seize an exempt vehicle is the bank that holds the note by a purchase money security agreement.
Tools of the trade are exempt from collections.
Home Furnishings and consumables are exempt.
In Texas you can exempt a certain amount of jewelry, family heirlooms, and 2 firearms from collection.
Most qualified retirement plans and pension funds are exempt. This is why some creditors will try to bully you into taking money out of a retirement plan. It’s exempt while in the plan, whereas not so much in your bank account.
As are the vast majority of government benefits, as well as the proceeds of a life insurance policy.
Household pets are exempt, no matter what some of the more outrageous creditors might try to say.
The most common targets of creditors are money in checking accounts, and land (or mineral rights) that is not contiguous to the homestead. Please understand that while there is no wage garnishment (generally) in Texas, that only prevents creditors from going after your employer to get part of your paycheck. Once those funds are in a bank account that rule no longer applies. Also please take note that a garnishment of a bank account does not just take the $6 in your account the day before payday. A garnishment is a lawsuit against the bank which creates a freezing process where the funds are held while the debtor and bank can challenge the garnishment. Depending on how fast your employers payroll service can move you may lose one or more paychecks. Meanwhile you have no ability to hire an attorney for bankruptcy or to challenge the garnishment as your account is frozen. Please keep this in mind before you flippantly use the term judgment proof.
This list is in no way exhaustive and it is for informational purposes only. It should not be construed as legal advice for your situation.
NOTE: The above is based on Texas and some federal law. Other jurisdictions may have different laws. Consult an attorney in your state should you have questions about that states laws.
Please call me for a free consultation 817 738 1633.