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Worried about losing your home if you file for bankruptcy? For most Texas homeowners, the short answer is no, you do not have to. Texas offers one of the most protective homestead exemptions in the country, and the right strategy can keep your house off the table entirely. A Dallas Chapter 7 bankruptcy attorney can walk you through the rules, the equity questions, and the few situations where your home could be at risk.
The Texas Homestead Exemption Explained
In Texas, the homestead exemption lets you protect unlimited equity in your primary residence. That sets the state apart from most others, where dollar protection is capped. As long as your home qualifies as your principal residence and falls within the state’s acreage limits, the equity inside it is protected when you file:
- Up to 10 acres for an urban homestead inside a city, town, or village
- Up to 100 acres for a rural homestead owned by a single adult
- Up to 200 acres for a rural homestead owned by a family
For most Dallas homeowners, the 10-acre urban limit is far more than enough.
How Much Equity Can You Have in Your Home and Still File Chapter 7 in Texas?
In Texas, there is no state dollar cap on home equity for a qualifying homestead. You could have hundreds of thousands in equity and still keep your home in Chapter 7.
One exception matters. If you acquired your current homestead within 1,215 days (about three years and four months) before filing, federal law caps the protected equity at an amount that is adjusted periodically for inflation. If your home is your long-standing residence, this rarely comes into play. If you bought recently and have substantial equity, talk with a Dallas Chapter 7 bankruptcy exemptions attorney before filing.
Remember: equity is your home’s market value minus what you still owe. A $400,000 home with a $360,000 mortgage has only $40,000 in equity.
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, discharges most unsecured debts and gives you a fresh start. A court-appointed trustee can sell non-exempt assets to repay creditors, but exemptions, including the Texas homestead, protect what matters most.
What Else Affects Whether You Keep Your Home?
The exemption protects your equity. Two other pieces protect the home itself.
Stay current on your mortgage. Chapter 7 discharges your personal liability, but it does not erase the mortgage lien. If you fall behind, your lender can still foreclose. To keep the house, you need to stay current or get current quickly.
Be careful with reaffirmation agreements. Some lenders ask you to sign a reaffirmation agreement, which keeps you personally on the hook for the loan after discharge. Sometimes that protects your relationship with the lender. Sometimes it locks you into debt you no longer need to carry. Review every reaffirmation with your attorney before signing.
Alternatives if Chapter 7 Doesn’t Fit
If Chapter 7 does not protect what you need, other options can.
- Chapter 13 bankruptcy lets you catch up on missed mortgage payments through a structured three-to-five-year plan while keeping your home.
- Loan modification can lower payments without a bankruptcy filing.
- A short sale or deed in lieu of foreclosure may protect your credit more than a forced sale would.
Frequently Asked Questions
What are the downsides of keeping my house during bankruptcy?
You still have to pay the mortgage, property taxes, and insurance. If those costs are draining the relief bankruptcy provides, keeping the home may not be the right call. Reaffirmation is the other concern, since it keeps you personally liable for the mortgage after discharge.
What assets cannot be touched in bankruptcy?
Beyond your homestead, Texas exemptions protect most retirement accounts, one motor vehicle per licensed household member, qualifying household furnishings and personal items up to a set value, tools of the trade, and certain life insurance and annuity benefits.
What is the 90-day rule for Chapter 7?
The 90-day rule covers two timing issues before filing. First, debts for luxury goods or services over a set dollar amount and are charged to a single creditor within 90 days of filing are presumed nondischargeable. Second, certain payments to non-insider creditors within those same 90 days can be clawed back by the trustee as preferences.
Talk to a Dallas Bankruptcy Attorney About Keeping Your Home
You do not have to choose between debt relief and your home. With the Texas homestead exemption, most Dallas-area homeowners can file Chapter 7 and walk away with both. The next step is a careful look at your specific equity, mortgage status, and timing. Contact Toronjo & Prosser Law today to learn how we can help you protect your home and your future.