Many times people that are forced into seeking bankruptcy protection due to an overload of personal or business debt have at least some equity in the family home. Home Equity refers to the difference in what you owe on a loan for your home and what the value of the home is. What happens to this when you seek protection and do you get to keep that money or is it used to pay creditors as well as the other assets? There is a provision called the Home Stead Exemption that comes into play if you file for a Chapter 7 bankruptcy. It can also be invoked in a Chapter 13 as well.
In a Chapter 7 bankruptcy the equity in your home is most definitely considered an asset and the trustee can take the home and sell it and use the funds to pay off the creditors. This is where the Homestead exemption would come into play. In a Chapter 13 if you have equity in your home that is non-exempt you will probably end up paying a ton of that to the unsecured creditors which is why a generous Homestead exemption could prove very beneficial in that case as well.
When you file bankruptcy in Texas you can choose to use federal exemptions statues instead of your Texas exemptions, but in some instances you may also use federal exemptions in addition to Texas bankruptcy exemptions. Because of the intricacies involved with a bankruptcy in Texas, a Houston bankruptcy attorney is an important individual to contact if you find yourself contemplating bankruptcy.
The Homestead Exemption amount is different in every state so you really need to contact a qualified bankruptcy lawyer in Houston TX to find out exactly what you may be entitled to claim as an exemption and to answer all of your other bankruptcy questions. The Homestead exemption is just one of the many exemptions that you may be entitled to and can often times make a huge difference in a person’s financial recovery after the bankruptcy has been discharged.