What Happens to My Home if I File for Chapter 7 Bankruptcy in Texas?
Filing for Chapter 7 bankruptcy can be a lifeline for Texans struggling with overwhelming debt. One of the most pressing concerns for many people considering bankruptcy is whether they will lose their home in the process. The answer depends on several factors, including Texas’ strong homestead exemption, the amount of equity in your property, and your mortgage status.
The Texas Homestead Exemption
Texas has one of the most generous homestead exemptions in the country. This exemption protects your primary residence from being sold to pay creditors, regardless of its value, as long as it is located on 10 acres or less in a city, town, or village—or up to 100 acres in the country (200 acres for a family). This means that most homeowners in Texas are able to keep their homes when filing for Chapter 7 bankruptcy.
Equity Matters
While the exemption covers unlimited value, it does not protect against foreclosure if you are behind on mortgage payments. If you are current on your payments, the exemption should allow you to keep your home. However, if you have significant equity beyond what the exemption covers in certain rare situations, the bankruptcy trustee could attempt to sell the home to pay creditors.
Mortgage Payments Still Count
Chapter 7 bankruptcy eliminates unsecured debts like credit cards and medical bills, but it does not erase your mortgage. If you want to keep your home, you must stay current on your payments. Falling behind could still result in foreclosure, even though your personal liability for the loan might be discharged.
When Selling the Home May Happen
If you are unable to make ongoing payments or your property falls outside the protection limits, the trustee may decide to sell it to repay creditors. In that case, you may be entitled to some of the proceeds after the mortgage and exemption amounts are applied.
Get Guidance Before You File
Because every case is different, it’s important to understand how Chapter 7 will affect your unique situation. At Shuster Law, PLLC, we can provide legal assistance to the Texas public and guide you through the bankruptcy process so you know exactly where you stand when it comes to protecting your home.
