When individuals and families in Texas and around the country file for bankruptcy, the bankruptcy trustee will determine whether the petition deals with an asset or a non-asset case. When the petitioner has assets exceeding federal or state exemptions, creditors can seek payment for unpaid debts by filing what are known as proofs of claim. The necessary paperwork can be downloaded from most bankruptcy court websites or the federal government.

How proofs of claim are satisfied

When creditors file a proof of claim, they must ensure that the paperwork includes the name and address of the bankruptcy petitioner, the bankruptcy case number, the amount of the debt in question and whether the debt is secured by property such as a car or home. When non-exempt assets are liquidated in a bankruptcy, the trustee decides how the money raised will be distributed. Debts that are prioritized include child and domestic support obligations, unpaid taxes and certain wages and commissions.

Texas has generous bankruptcy exemptions

However, these issues rarely come up in Texas. This is because the Lone Star State has some of the most generous bankruptcy exemptions in the country. When Texas residents who live in urban areas file Chapter 7 or Chapter 13 personal bankruptcies, their homes are protected as long as the lots they stand on are not larger than 10 acres. In rural areas, the homestead exemption covers properties up to 100 acres for individuals and 200 acres for families. Texas also exempts $50,000 in personal property for individuals and $100,000 in personal property for families as well as specific assets like family heirlooms, automobiles and tools used to earn a living.

Texas law makes the timing of a bankruptcy important

If you are struggling to cope with unmanageable levels of debt and are considering bankruptcy, attorneys with experience in this area may ask you to consider delaying your petition if you recently moved to Texas. This is because the Texas bankruptcy exemptions only cover individuals or families who have lived in the state for two years or longer. An attorney might also advise you to wait if you recently sold your home as the proceeds from property transactions are only protected after six months have passed.