How Does the Texas Homestead Exemption Apply in Chapter 7 or Chapter 13 Bankruptcy?

 Posted on October 28, 2026 in Exemptions

For many families, their house is the single most valuable asset they own. When credit card bills, medical debt, or a lost job push a household toward bankruptcy, the first question is almost always the same: Will I lose my home? The answer depends largely on a legal protection called the homestead exemption, and Texas has one of the strongest versions of this exemption in the country.

In most cases, the Texas homestead exemption allows you to keep your home in bankruptcy no matter how much equity you have in it. Texas does not put a dollar limit on the value of a homestead. Instead, it limits the size of the property by acreage. As long as your home falls within those acreage limits, creditors generally cannot force the sale of your house to pay your debts. An experienced bankruptcy lawyer can explain how this protection works, when it can fall short, and how it plays out in Chapter 7 and Chapter 13 cases.

What Is the Homestead Exemption?

An exemption is a law that protects the property you own from being taken by creditors during bankruptcy. When you file for bankruptcy, everything you own becomes part of what is called the bankruptcy estate. Exemptions let you pull certain property back out of that estate so you can keep it.

The homestead exemption protects the equity in your primary home. Equity is the difference between what your home is worth and what you still owe on it. For example, if your home is worth $400,000, and you owe $250,000 on your mortgage, you have $150,000 in equity. In many states, that much equity would be at risk in bankruptcy. In Texas, it is usually fully protected.

It's important to understand what the exemption does not do. It protects your equity from unsecured creditors, such as credit card companies and medical providers. It does not erase your mortgage. Your lender still holds a lien, which is a legal claim against the property, and you must keep making your payments if you want to keep the house.

How Much Home Equity Does Texas Protect?

The Texas homestead exemption is defined in Chapter 41 of the Texas Property Code. Under Texas Property Code Section 41.002, the protection is based on the size of the property rather than its dollar value.

Urban Homesteads

If you live in a city like San Antonio, your home is likely considered an urban homestead. Texas law protects up to 10 acres of land in one or more connected lots, along with any improvements like your house, garage, or workshop. The property must be used as your home, or as both your home and your place of business.

Rural Homesteads

If you live outside city limits, such as on acreage in rural Bexar County or nearby Medina, Wilson, or Comal counties, your property may qualify as a rural homestead. Texas law protects up to 200 acres for a family or up to 100 acres for a single adult, along with the improvements on that land.

Can Texans Use the Federal Exemptions Instead?

Texas is one of the states that lets bankruptcy filers choose between the state exemptions and the federal exemptions. You must pick one list or the other; you cannot mix and match. As of October 2026, the federal homestead exemption protects $31,575 in home equity. Homeowners with meaningful equity almost always choose the Texas exemptions. The federal exemptions may make sense for some renters or people with very little home equity. Our attorney can provide guidance on what exemptions may be more beneficial to use.

When Might the Texas Homestead Exemption Not Fully Protect Your Home?

Even with an unlimited dollar amount, the Texas exemption has limits. Federal bankruptcy law provides several rules designed to stop people from moving to Texas or shifting money into a home right before filing for bankruptcy. Your homestead protection may be reduced if any of the following apply:

• You have lived in Texas for less than 730 days before filing. In that case, you may have to use the exemption laws of the state you lived in before.

• You bought your home, or added equity to it, within 1,215 days before filing. Under Section 522(p) of the U.S. Bankruptcy Code, equity gained during that window is capped at $214,000, unless it was rolled over from a previous Texas home.

• You moved non-exempt money, such as savings or investment funds, into your home within 10 years of filing for bankruptcy with the intent to cheat creditors.

• You have been convicted of certain felonies or owe debts from specific types of fraud or securities violations, which can trigger the same $214,000 cap under Section 522(q).

• Your property is larger than the acreage limits, or part of it is not used as your home, such as a separate rental house or a vacation property.

If none of these exceptions apply, your home equity is most likely safe. If one or more do, the type of bankruptcy you file may become much more important.

What Happens to Your Home in a Chapter 7 Bankruptcy in Texas?

Chapter 7 is often called "straight" or "liquidation" bankruptcy. It wipes out many types of unsecured debt, usually within a few months. When you file for Chapter 7, a court-appointed official called a trustee will review your property. The trustee's job is to find assets that are not protected by exemptions and sell them to pay your creditors. You will list your homestead and the exemption you are claiming on a form called Schedule C. If your home falls within the Texas acreage limits, and none of the federal timing rules apply, the trustee has no right to sell it.

What If You Have Unprotected Equity?

If part of your equity is not protected, such as in a situation where you bought your home 18 months ago with a large down payment, the trustee could sell the house. In that situation, you would receive the protected amount, the mortgage lender would be paid, and the rest would go to your creditors.

However, a sale is not automatic. A trustee usually won't sell a home if the costs of selling it, such as real estate commissions and closing costs, would eat up most of the unprotected equity. In some cases, you may be able to pay the trustee the value of the unprotected equity to keep the home. Still, Chapter 7 offers fewer tools when a home has equity that falls outside the exemption.

Keeping Up With Your Mortgage in Chapter 7

Chapter 7 does not help you catch up on missed mortgage payments. If you are already behind, your lender can ask the court for permission to move forward with foreclosure once the case is underway. Chapter 7 tends to work best for homeowners who are current on their mortgage and want relief from other debts.

How Does Chapter 13 Protect Your Home in Texas?

Chapter 13 is sometimes called a "wage earner's plan" or "adjustment of debts." Instead of selling property, you will pay back some or all of your debts through a court-approved repayment plan that lasts from three to five years. Whether your plan lasts three or five years will depend in part on how your household income compares with the median income for a Texas household of your size.

Protecting Equity That Exceeds the Exemption

Chapter 13 often protects homes better than Chapter 7 when equity is not fully covered. Under a rule known as the "best interest of creditors" test, found in Section 1325(a)(4) of the Bankruptcy Code, your plan must pay your unsecured creditors at least as much as they would have received if a Chapter 7 trustee had sold your property. In exchange, you will be able to keep your home.

Depending on your situation, this might mean paying more to creditors than you would have otherwise. In other cases, you may simply be required to pay what you can during the repayment plan, or you may pay debts you would have had to pay anyway, such as back income taxes or child support.

Stopping a Foreclosure in Bexar County

Chapter 13 can also be a powerful tool for homeowners who have fallen behind on mortgage payments. Filing for bankruptcy will trigger the automatic stay, a court order that will immediately stop most collection actions, including a foreclosure. Through a Chapter 13 plan, you can then:

• Spread missed mortgage payments over three to five years while keeping up with regular payments.

• Catch up on past-due property taxes.

• Address overdue homeowners' association dues that might otherwise lead to a lien or foreclosure.

Missing a payment under the repayment plan can put your bankruptcy case and your home at risk, so it's important to build a plan you can realistically keep up with.

Contact Our San Antonio, Texas Bankruptcy Lawyer for Homestead Exemptions

Every bankruptcy case is different. The details of when you bought your home, how long you have lived in Texas, and how much equity you have can make a real difference in how your case may be handled. At Law Offices of Chance M. McGhee, our Boerne, TX bankruptcy attorney can review your situation, explain whether Chapter 7 or Chapter 13 may better protect your home, and walk you through each step of the process. Call 210-342-3400 today to schedule a free consultation and learn more about your options.