With few exceptions, exemption laws protect the property you need most: your home, your car, and your necessary items of personal property. Creditors can’t literally take the shirt off your back.
If you are eligbile to use Texas exemptions, your homestead is exempt from the claims of your general creditors. Your mortgage, taxes, and certain other creditors are the only creditors that can get a lien on your home or foreclose on that lien. Personal vehicles, tools of the trade, furniture, clothing, retirement accounts, life insurance policies, and other important items of personal property are usually protected as well from your general creditors — unless they have a lien on such property. This means your medical bills, credit cards, and other creditors will have a hard time laying their hands on your property. Also, other than for child support and taxes, your wages cannot generally be garnished if you have a Texas employer. On the surface, then, you might say that it’s good to be a debtor in Texas.
You might well ask: why are my creditors suing me if they can’t take my property? Because a judgment lien attaches to all property owned in the county in which the lien is filed, and that lien then “clouds” the title to real property owned in the county — making it difficult to buy, sell, or refinance real estate in that county. Also, creditors with judgments will sometimes get a garnishment order to “sweep” your bank account. It’s true: your wages can’t be garnished, but once the money hits your bank account it may be fair game for creditors with a garnishment order. That’s why at Bailey & Galyen we say: unless you want to rent a house or apartment for the rest of your life and want to live on a cash basis with no bank accounts, ignoring your creditors and lawsuits is a bad idea. Determined creditors can eventually reach you and make your life miserable.
Bankruptcy ends the misery and stops all creditor collection actions — including lawsuits and the judgments they create. In bankruptcy, Texas debtors also have the ability to choose the Federal exemptions if they choose, which are even more flexible, allowing you to possibly exempt things that are not exempt under the Texas exemptions — things like cash, money in the bank, and extra property of moderate value.