Non-exempt assets in Chapter 7 in Texas are property or equity not covered by Texas or federal exemptions. The bankruptcy trustee may sell the non-exempt value to pay unsecured creditors. Common examples include extra vehicles, non-homestead real estate, and cash above exemption limits.
Since 2006, Warren & Migliaccio, L.L.P. has helped people in North Texas use bankruptcy law to pursue a fresh financial start. Our attorneys are Lead Counsel Verified, and our bankruptcy practice serves Dallas, Collin, Denton, and Tarrant counties. Call (888) 584-9614 for a free consultation.
Non-Exempt Equity: The Math Trustees Use
Trustees usually focus on the equity that is not protected, not the item itself.
Worked example (from this article): A paid-off car worth $8,000. An exemption protects $6,800. Estimated sale costs are $700.
Why this matters: Even when something is non-exempt on paper, sale costs and buyback options often change the real outcome.
Key Definitions (The Consensus View)
Chapter 7 creates a bankruptcy estate, which is the pool of property the trustee reviews. Exemptions are legal protections that take certain property out of reach of most creditors and out of the trustee’s sale options. Non-exempt usually means “at risk,” but trustee decisions often depend on value, liens, and what it costs to sell the item.
Term | Texas Definition |
|---|---|
Exempt Property | Assets protected by Texas or federal law that you keep after bankruptcy |
Non-Exempt Property | Assets (or value) the trustee can sell to pay your creditors |
Equity | Value minus liens (what you truly “own” in an item) |
Bankruptcy Trustee | Court-appointed official who reviews assets and can sell non-exempt property |
No-Asset Case | A Chapter 7 case where the trustee finds no non-exempt value to liquidate |
Bankruptcy Estate | The legal “bucket” of all property reviewed in bankruptcy |
What Makes an Asset “Non-Exempt” in a Texas Chapter 7 Case?
An asset is “non-exempt” when it is not protected by the exemption set you claim, or when the value you own in it is higher than what the exemption protects. The result is simple: the trustee can treat that value as available to creditors.
Why the Label Matters
In Chapter 7 bankruptcy, non-exempt assets are sold to pay off creditors. That is the core “liquidation” rule in plain English. The goal is usually to pay something toward unsecured creditors after higher-priority claims are handled.
Two Rules Readers Usually Miss
- You must disclose all assets, even if you think they are exempt. Full disclosure is not optional in bankruptcy court.
- “Non-exempt” often means non-exempt equity, not the whole item (value after liens and exemptions).
Texas vs. Federal Exemptions: How to Choose
Texas allows bankruptcy filers to choose between state exemptions and federal exemptions. You cannot mix them. This choice can change what property is protected and what is at risk.
Texas vs. Federal Exemptions: A Practical Snapshot
You cannot mix state and federal exemptions. The better choice depends on what you own and what is at risk.
Own a qualifying home with significant equity
Often favors: Texas state exemptions
Why: The homestead rules can be very strong for a primary residence, but timing and property qualification still matter.
No home, but varied personal property
Often favors: Federal exemptions
Why: The wildcard approach can be useful when you are not using a homestead-based strategy and your property mix is spread out.
Pending lawsuit settlement or proceeds
Often favors: Federal exemptions
Why: The article flags lawsuit proceeds as a risk area under Texas protections, so the exemption fit needs careful review.
Multiple vehicles in the household
Often favors: Texas state exemptions
Why: Texas vehicle protection is tied to licensed household members, which is why “extra vehicles” becomes a trigger.
Note: This is general information. Exact results depend on values, liens, timing, and which exemption system applies to your situation.
Most Texans with homes benefit from state exemptions. Those without real estate should calculate federal wildcard advantages. Our team handles this analysis during your free consultation so you make the right choice.
What We Consistently See When People Choose Texas vs. Federal Exemptions
In our North Texas bankruptcy work, I often meet people who feel worried and uncertain because they have heard that Texas is always the best choice. The truth is that the decision depends on what assets you actually have, and what is at risk in your Chapter 7 case.
In the Northern District of Texas (Dallas and Fort Worth divisions), we focus on the same basics every time: list every asset, confirm how it is owned, and match it to the right exemption system. That is where issues often show up, especially when a person has no home but has varied personal property, or when they are waiting on lawsuit proceeds.
The Takeaway: The exemption choice is not a slogan. It is a facts-first decision that can change what property is protected.
Who This Helps vs. Who Needs Something Else
This guide is for people who are worried about losing normal life property.
Best for: People considering Chapter 7 who mainly own exempt assets (like normal home furnishings, a qualifying homestead, and retirement accounts) and want to confirm whether cash, vehicles, or valuables create risk.
Not ideal for: People with significant non-homestead real property, multiple high-equity vehicles, or large cash balances who may need Chapter 13 or careful timing and exemption planning.
Common Non-Exempt Assets in Texas Chapter 7 (With Plain Examples)
Exemptions in Texas protect certain types of property, with limits on their value, such as $50,000 for individuals for aggregate personal property. This is why cash, extra vehicles, and “nice to have” property can become a problem.
Asset Type | When It Can Become Non-Exempt | Example |
|---|---|---|
Extra Vehicles | More vehicles than exemptions cover, or equity above what can be protected | A second paid-off car not needed for a licensed household member |
Non-Homestead Real Estate | Property that is not the primary residence homestead | Rental house, land, vacation cabin |
Cash and Bank Balances | Amounts that exceed the personal property exemption cap, or cash not traceable to protected sources | $12,000 sitting in checking right before filing |
Valuable Collectibles | High resale value that does not fit within exemption limits | Coins, designer jewelry, high-end electronics collection |
Business Assets | Equipment, inventory, or receivables that do not fit exemptions | Side business inventory stored at home |
Boats and Recreational Vehicles | Unless used for work | Jet ski, camper, ATV |
Investment Accounts | Stocks, bonds, brokerage accounts (not retirement) | Non-IRA brokerage account |
Texas allows you to exempt the entire value of one motor vehicle per licensed household member. That means “extra vehicles” is a common non-exempt assets trigger, not a single needed car.
Texas Exemption Limits That Determine What You Keep
| Property Type | Texas Exemption Limit | Notes (as stated in the article) |
|---|---|---|
| Homestead | Unlimited value | 10 acres urban / 100 acres rural; 1,215-day ownership rule |
| Motor Vehicle | Unlimited value | One per licensed household member |
| Personal Property | $50,000 single / $100,000 married | Includes furniture, clothing, tools |
| Jewelry | $12,500 | Part of personal property exemption cap |
| Retirement Accounts | Unlimited | 401k, IRA, pensions fully protected |
| Life Insurance | Cash value protected | Under current Texas Insurance Code provisions |
Residency Warning: Texas’s unlimited homestead exemption requires residency for at least 730 days and home ownership for at least 1,215 days to qualify fully. Filing too soon means using your previous state’s exemptions instead.
How to Calculate “Non-Exempt Equity” (The Math Trustees Use)
Trustees look at the part you actually own, not the sticker price. The basic formula is:
Fair Market Value − Liens − Allowed Exemption = Non-Exempt Equity
Worked example: A paid-off car worth $8,000. An exemption protects $6,800. Sale costs are $700. That can leave a small amount the trustee may negotiate instead of selling.
Trustees also consider sale costs (auction fees, towing, storage, commissions). Sometimes “non-exempt” on paper is not worth selling in real life.
Can You Convert Non-Exempt Assets Into Exempt Property Before Chapter 7 in Texas?
Last-minute asset moves can create new problems. Under Tex. Prop. Code § 42.004 (2024), using non-exempt property to acquire or improve exempt property with intent to defraud, delay, or hinder a creditor can cause the acquired property or improvement to be treated as not exempt. That same law includes a two-year limitation window for many claims.
Examples we often warn clients about include:
- Paying down or improving an exempt item (like a homestead) using non-exempt cash right before a bankruptcy filing
- Shifting assets into an exempt category without a clear, normal-life reason you can explain and document
This is why we often recommend a free consultation before you sell, transfer, or spend down assets.
Now that you have identified non-exempt value, what happens next?
At this point, you know what property can be non-exempt and how trustees calculate non-exempt equity. The next question is practical: if you file Chapter 7 and the trustee thinks an asset has non-exempt value, what are the most common outcomes and what does the process look like?
What Happens After You File Chapter 7 If You Have Non-Exempt Assets?
We’ve answered what “non-exempt” means. Now it helps to know what typically happens next in the bankruptcy process. A scary label does not always lead to a forced sale.
No-Asset vs. Asset Case
Many Chapter 7 bankruptcies are “no-asset cases” where none of the filer’s property is non-exempt. A no-asset case means the trustee is not selling property because there is no meaningful non-exempt value to liquidate.
The Three Common Outcomes
- Trustee abandons the asset (not worth selling)
- Debtor buys back the non-exempt equity (pays the estate)
- Trustee sells the asset and pays creditors
When Chapter 13 May Be Safer
In Chapter 13 bankruptcy, filers can keep their non-exempt property but must pay the value of that property to unsecured creditors over time. Chapter 13 can be a safer fit when too much property is non-exempt in Chapter 7.
Case Study: Collin County Filer Keeps a Second Car by Buying Back Equity
Hypothetical Illustration
Problem: A Collin County single filer owns a paid-off second car worth $7,000 and has $4,500 in the bank. They fear losing transportation. They hear “Chapter 7” and assume everything is gone.
Action: We help value the car correctly, apply exemptions, and do the sale-cost math the trustee will use. We then negotiate a buyback option instead of a sale.
Result: The trustee claims $1,500 in non-exempt equity. The filer pays $1,500 to keep the vehicle.
Takeaway: “Non-exempt” does not always mean “sold,” but disclosure and early planning matter.
Step-by-Step: How a Chapter 7 Trustee Handles Non-Exempt Assets in Texas
A bankruptcy trustee follows a practical checklist to find out whether any non-exempt value exists and whether it is worth action. When clients bring us in early, we help them present clean, well-supported values so the process stays predictable.
- List every asset and debt in the schedules (values matter)
- Trustee reviews values, liens, and claimed exemptions
- Trustee asks questions at the meeting of creditors and requests proof (titles, bank statements, appraisals)
- Trustee calculates non-exempt equity and estimates sale costs
- If there is value, trustee chooses a path: abandon, negotiate a buyback, or sell
- If sold, proceeds go through the bankruptcy process and are paid out under priority rules, then to unsecured creditors
- Case closes after administration, and discharge enters if other requirements are met
Most readers do best when they treat this as a paperwork and math process, not a moral judgment. (This is the part where most clients panic, but you do not have to.)
Texas Statutes That Apply
Texas law gives you powerful protections, but details matter. Here are three rules that come up often in non-exempt asset discussions.
Tex. Prop. Code § 42.001 (2024): Sets the personal property cap and protects certain items like current wages. This is why “cash fears” often come down to when money hits and what it is from.
Tex. Prop. Code § 42.004 (2024): Limits last-minute conversion of non-exempt to exempt property when intent is improper, with a two-year claim window. This is why “moving money around” right before filing can backfire.
11 U.S.C. § 522 timing rules: Federal residency and homestead lookback rules can affect which exemptions apply and whether a homestead cap is triggered. This is why a move to Texas or a recent home purchase should be reviewed carefully.
Mistakes to Avoid (And Bad Advice Online)
Most bankruptcy trouble starts with bad assumptions, not bad people.
- Hiding assets or “forgetting” accounts. The trustee can still find them, and it can harm your case.
- Waiting to value items until after filing. Timing matters for bank balances and tax refunds.
- Moving money around without advice, especially if it looks like creditor avoidance.
- Assuming “Texas homestead means nothing can touch me” without checking timing and acreage.
- Believing you will automatically lose everything. Texas exemptions are among the most generous in the country. Most families keep everything they own.
Frequently Asked Questions About Non-Exempt Assets in Chapter 7 Bankruptcy in Texas
Non-Exempt Assets and Common Examples
What are non-exempt assets in Chapter 7 bankruptcy?
Non-exempt assets in Chapter 7 in Texas are property or equity not protected by exemptions, such as:
- Extra vehicles with unprotected equity
- Rental properties or vacation homes
- Cash above your exemption limits
- High-value collectibles, family heirlooms, or jewelry
Chapter 7 is a liquidation case, so the bankruptcy trustee can sell non-exempt value to pay unsecured creditors. In practice, the risk is usually about non-exempt equity, not the whole item. Equity means the fair market value minus any loans or liens, minus the exemption amount you claim. That is why two people can own the same type of property but have very different outcomes. Texas filers generally choose either Texas state exemptions or federal exemptions under 11 U.S.C. § 522 (as amended), and that choice can change what counts as protected.
Are bank accounts or cash non-exempt in Chapter 7 in Texas?
Yes. Cash in bank accounts can be non-exempt if it exceeds the exemptions you can claim.
Bank balances are one of the most common non-exempt assets in Chapter 7 in Texas because cash has a clear dollar value and is easy to verify. Under Tex. Prop. Code § 42.001 (2024), Texas provides an aggregate personal property exemption cap (often described as $50,000 for a single filer and $100,000 for a married couple filing together). Cash, savings, and many everyday items generally count toward that cap.
Two practical points matter in real cases:
- The balance is often judged based on what is in the account around the filing date (a payday spike can change the picture).
- Tracing matters. If money came from a protected source, documentation can be important.
This is also why married filers can often protect more property when filing jointly, because the total exemption amount commonly increases.
Can the trustee take my tax refund or savings?
Yes. A tax refund or savings can be taken if it is not covered by your claimed exemptions at filing time.
A refund can be a target because it is often treated as value you earned before filing, even if the check arrives later. Savings can be similar: if it is sitting in checking or a savings account and exceeds what your exemption system protects, it can be treated as non-exempt value. In North Texas bankruptcy court, trustees commonly request bank statements and recent tax records to confirm what funds exist and when they were received.
If a refund or savings is spent before filing, the details matter. Ordinary living expenses are different from unusual transfers or big purchases made to keep money away from creditors. The key is that timing, documentation, and exemption choice drive risk, not the label “refund” or “savings” by itself.
What Happens After Filing Chapter 7 With Non-Exempt Property
What is a no-asset Chapter 7 case in Texas?
A no-asset Chapter 7 case is one where the trustee finds no non-exempt value worth selling after exemptions, liens, and sale costs. Creditors are told not to file claims because there is nothing to distribute.
Many Chapter 7 bankruptcies are no-asset cases, meaning the trustee is not selling property because there is no meaningful non-exempt value to liquidate. A no-asset case does not mean you own nothing. It means the trustee decides that, after applying exemptions and subtracting costs of sale, there is nothing worth turning into cash for creditors.
Even in a no-asset case, full disclosure still matters. Filers must list all property, even items they believe are exempt. If values are understated or an asset is omitted, a case can change course fast. Trustees can request proof like titles, appraisals, or bank records, and they can take action if new non-exempt value is identified.
Will the Chapter 7 trustee take everything I own?
No. In most cases, the trustee only targets property with non-exempt value worth selling after costs.
Most filers keep the “normal life” property they need, especially when it falls under Texas bankruptcy exemptions. Trustees are typically practical: if an item has little resale value, heavy liens, or high sale costs (storage, towing, auction fees), it may be abandoned instead of sold.
When there is some non-exempt equity, the result is not always a forced sale. Common outcomes include:
- The trustee abandons the asset if selling is not worth it
- The debtor pays the estate to buy back the non-exempt value
- The trustee sells the item when there is meaningful net value
The fastest way to turn a manageable case into a crisis is hiding property or “forgetting” accounts. Bankruptcy requires complete disclosure, and non-disclosure can jeopardize the discharge.
Will I lose my house in Chapter 7 in Texas?
No, not if your home qualifies as your homestead and the exemption rules protect your equity.
Texas is known for the strength of the Texas homestead exemption. Under Tex. Prop. Code §§ 41.001–41.003 (2024), a qualifying homestead can protect a very large amount of value in a primary residence, but the protection depends on how the property is used and whether it fits the homestead definition. Texas also treats improvements to the home (like a swimming pool or barn) as part of the homestead, which matters when people worry that upgrades make the home “excess” property.
Timing can also change outcomes. Federal law has residency and lookback rules that can limit which exemptions apply for newer Texas residents or recent home purchases. See 11 U.S.C. § 522 (as amended). And a second home, rental property, or vacation home is usually not a protected homestead, even if your primary residence is.
Exemptions, Retirement Accounts, and Last-Minute Moves
Are retirement accounts non-exempt in Texas Chapter 7?
No. Many tax-deferred retirement accounts are treated as exempt in Texas Chapter 7 cases, so the trustee generally cannot use them to pay creditors.
Certain tax-deferred retirement plans are commonly protected in Chapter 7 bankruptcy in Texas, including many workplace plans and traditional retirement vehicles. In day-to-day trustee reviews, the key issue is usually whether the funds are actually in a qualified retirement account versus sitting as cash after a withdrawal.
A common problem we see is when someone cashes out retirement to “get ahead” of bills right before filing. Once funds leave a protected retirement account and become cash in a bank account, the analysis can change because cash is measured against the personal property exemption limits. Another issue is account ownership and documentation. If statements are incomplete or the account type is unclear, trustees may ask follow-up questions and request proof.
The short version: keep clean records, and do not assume every account labeled “retirement” is automatically protected without confirming the account type.
Is it risky to move money or buy exempt property right before filing Chapter 7 in Texas?
Yes. Texas law can treat last-minute conversions as non-exempt if they were done to hinder, delay, or defraud creditors.
Texas has a specific rule on last-minute exemption planning. Under Tex. Prop. Code § 42.004 (2024), using non-exempt property to acquire or improve exempt property with improper intent can cause the acquired property or improvement to be treated as not exempt. The statute also includes a two-year limitation period for many claims.
The risk is not normal life spending. The risk is conduct that looks like an attempt to put assets out of reach, such as transferring valuable property to a family member, shifting title, or making unusual large moves that do not match your ordinary financial pattern. Trustees and creditors often focus on timing, the paper trail, and whether the explanation makes sense. Even when the end goal is keeping necessary property, the wrong move at the wrong time can create avoidable litigation inside the bankruptcy case.
Talk With Our North Texas Bankruptcy Attorneys Before You File
If you are worried about “non-exempt” assets, the right next step is usually a quick review of your equity, your bank balances near the filing date, and whether Texas or federal exemptions fit your situation. Small details like liens, sale costs, and timing can change the outcome.
Warren & Migliaccio can help you understand what is truly at risk and whether Chapter 7 or Chapter 13 is the safer path for your goals. Call (888) 584-9614 for a free consultation, and we will walk you through your options in plain English.
Legal Authorities
¹ Tex. Prop. Code § 42.004 (2024) — Transfer of Nonexempt Property
² Tex. Prop. Code § 42.001 (2024) — Personal Property Exemption
³ Tex. Prop. Code § 41.001-41.003 (2024) — Texas Homestead Exemption
⁴ Tex. Prop. Code § 42.002 (2024) — Motor Vehicle Exemption
⁵ 11 U.S.C. § 522 (as amended) — Choice of Exemption Systems; Timing and Residency Rules
