September 14, 2023

Will I Lose My House in Bankruptcy in Texas?

Bankruptcy is a legal process that allows individuals and businesses to seek relief from overwhelming debts. It provides a fresh start by eliminating or restructuring debts, but it often comes with concerns about losing one's assets, particularly one's home.

In this article, we explore the different types of bankruptcy, the role of exemptions, factors that influence the likelihood of losing your home, strategies to protect your home, and the emotional and practical considerations surrounding bankruptcy.

Different Types of Bankruptcy

There are two common types of bankruptcy for individuals in the United States: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7

Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the sale of non-exempt assets to repay creditors. However, in Texas, there are generous exemptions, including the homestead exemption, which may protect some or all of your home's equity. Therefore, you can keep your house if your equity is within the exemption limits.

Chapter 13

Chapter 13 bankruptcy, also called reorganization bankruptcy, involves creating a repayment plan to pay off your debts over a specified period, usually three to five years. It allows homeowners to keep their house by catching up on mortgage arrears through the repayment plan. It provides an opportunity to save your home if you are committed to making regular payments and adhering to the plan.

Exemptions in Bankruptcy

Exemptions play a crucial role in bankruptcy proceedings. These are specific assets or amounts of money protected from being seized by creditors or the bankruptcy trustee.

In Texas, the homestead exemption is particularly important for homeowners. It protects a certain amount of equity in your home, depending on whether you are single, married, or have a family. This exemption allows you to retain your home even if you file for bankruptcy if your equity falls within the exemption limits.

Apart from the homestead exemption, other exemptions may affect homeowners in Texas. These include

  • Exemptions for personal property
  • Motor vehicles
  • Retirement accounts
  • and more.

Understanding the exemptions available is crucial in determining whether you can keep your home during bankruptcy.

Factors That Influence Whether You'll Lose Your Home

Several factors influence the likelihood of losing your home in bankruptcy.

Home Equity

The amount of equity you have in your house is a significant factor. If you have little to no equity, it may be easier to keep your home because there is not much value for the creditors to pursue. However, if you have substantial equity, the bankruptcy trustee may consider selling the house to repay your debts.


The status of your mortgage payments is also crucial. If you are current on your mortgage payments, it may increase the chances of keeping your home. However, if you are behind on payments, the mortgage company may have the right to foreclose on your property, regardless of the bankruptcy filing.

Your Financial Situation

Your overall financial situation and the specific laws in your state or local jurisdiction can also affect the outcome. Each jurisdiction has nuances and exemptions, so it is essential to understand the specific rules that apply to your situation.

Strategies to Protect Your Home

If keeping your home is a priority, there are strategies you can employ to protect it during bankruptcy.

File for Chapter 13 Bankruptcy

Filing for Chapter 13 bankruptcy may be viable, as it allows you to catch up on mortgage payments through the repayment plan. It provides the opportunity to save your home while still addressing other debts.

Negotiate Your Mortgage

Alternatively, you may consider alternative solutions to bankruptcy, such as negotiating with your mortgage company or exploring debt consolidation options. Consult a bankruptcy attorney who can guide you through the process, evaluate your options, and help you choose the best strategy to protect your home.

Emotional and Practical Considerations

The decision to file for bankruptcy can be emotionally challenging, especially regarding the possibility of losing your home. Addressing the emotional stress and seeking support from friends, family, or a counselor is important.

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