Homestead Exemption in Texas
The homestead exemption is the primary tool for protecting your home in bankruptcy. In Texas, the homestead exemption is Unlimited (10 acres urban, 100 acres rural / 200 family).
This exemption protects equity in your primary residence. Equity means the fair market value minus the total of all mortgages, liens, and encumbrances. If your equity is within the exemption limit, the Chapter 7 trustee cannot sell your home.
Two-year residency rule: Under 11 U.S.C. Section 522(b)(3), if you have not lived in Texas for at least 730 days before filing, you may be required to use the exemptions of the state where you lived during the 180 days before that 730-day period. This prevents forum shopping.
Chapter 7: Will the Trustee Sell Your Home?
In Chapter 7, the trustee examines whether your home has non-exempt equity. If it does, the trustee can sell the home, pay you the exempt amount, and distribute the rest to creditors.
However, most Chapter 7 cases are "no-asset" cases -- meaning the trustee finds nothing worth liquidating. The trustee will not sell your home unless the non-exempt equity is substantial enough to generate meaningful funds after paying the costs of sale (broker commissions, closing costs, trustee fees).
Practical threshold: Even if you have equity slightly above the exemption, the trustee may abandon the property if the costs of sale would consume the surplus. There is no guaranteed threshold -- it depends on the trustee's judgment and local market conditions.
Texas homestead: Unlimited (10 acres urban, 100 acres rural / 200 family). If you are close to this limit, consider whether Chapter 13 (which always lets you keep your home) is a safer choice.
Chapter 13: Stop Foreclosure and Catch Up
Chapter 13 is designed to let you keep your home while catching up on missed mortgage payments. Key benefits:
- Cure arrears over 3-5 years: Missed mortgage payments are spread across your repayment plan. You resume regular payments going forward while the arrears are paid through the plan.
- Automatic stay stops foreclosure: Filing Chapter 13 immediately halts foreclosure proceedings under 11 U.S.C. Section 362.
- Lien stripping: If your home is worth less than your first mortgage balance, Chapter 13 allows you to strip (remove) junior liens (second mortgages, HELOCs) entirely. The junior lien is reclassified as unsecured debt.
- Modification: While bankruptcy does not modify first mortgage terms, the payment plan gives you breathing room to negotiate with your lender.
To keep your home in Chapter 13, you must continue making regular mortgage payments on time throughout the plan, plus plan payments that include the arrearage cure.
Mortgage and Foreclosure Rules in Texas
Each state has different foreclosure procedures, timelines, and protections. Key considerations in Texas:
- Bankruptcy districts: Northern District, Eastern District, Southern District, Western District. Local rules may affect how mortgage creditors interact with the bankruptcy court.
- Homestead exemption: Unlimited (10 acres urban, 100 acres rural / 200 family)
- Median income (single filer): $49,398. This affects whether you qualify for Chapter 7 or must file Chapter 13.
Texas has unlimited homestead protection, $30,000 per person in vehicle equity, and a $50,000-$100,000 personal property aggregate. It is one of the most debtor-friendly states in the country.
If you are facing foreclosure, timing matters. Filing bankruptcy too late (after a foreclosure sale) means the automatic stay cannot help you recover the property. File before the sale date.
Best outcome: Most homeowners keep their home through bankruptcy. In Chapter 7, the exemption protects equity. In Chapter 13, you cure arrears and stop foreclosure. The key is filing before it is too late.
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