CHAPTER 7 - CAN I KEEP THE DOG HOUSE?

 
If you have lived in Texas two (2) years prior to the date you filed your Chapter 7 bankruptcy (or plan on filing) you are entitled to use Texas Law to determine what property you get to keep.  That means you may either use the property that is "exempt (free to keep)" from bankruptcy under the Texas State Statute or you may choose to use the Federal Exemption Laws.  Which law you use is up to the person(s) filing Chapter 7, which means you get to choose the statute (Texas State or Federal) that gives you the most benefit.  For most people this generally means you get to keep everything you have, with few exceptions.
Which law is most advantageous depends on whether or not you own a home and how much equity you have in your home. Equity is determined by the difference between what you owe on the house and how much the house is worth.  If your house has a lot of equity one usually finds the Texas Statute gives a person the biggest relief.  While Texas Law protects most things it does not protect cash, cash in banks or income tax refunds.  Federal Law on the other hand would allow you to apply the "wild card".  The "Wild Card" under federal exemptions is exactly the same concept as the wild card used in a poker game - it is any card you want it to be.  In a bankruptcy case, it can be used to exempt from the bankruptcy anything that the debtor wants to keep that is not otherwise exempt.  The 'Wild Card' is contained in Section 5 of the Federal Statute.
The exemption laws are designed to allow people to keep enough of their property to have a "fresh start", not to strip them of their assets or dignity.
Click on these links to see an outline of the Texas Exemption Code and an outline of the Federal Exemption Code.
The fate of your property not protected by either statute (Texas or Federal) is in the hands of the Chapter 7 Trustee. The Chapter 7 Trustee is only going to take things he can turn into a relatively large amount of cash quickly which he can then use to pay your creditors.
6. What property will I get to keep?