The State of Texas has very liberal exemption laws, perhaps the most liberal of any state. For example, if you live in a rural area, you can claim as exempt up to 100 acres of land, plus all improvements (buildings, etc.). For a family, Texas law lets you exempt up to 200 acres with all improvements. And in both cases, the land can be in one or more different parcels.

In a recent chapter 7 bankruptcy court case in Houston, that was the issue. The Lings sued their neighbors the McLaughlins but lost, and the McLaughlins obtain a $45,000 judgment against the Lings for their attorney fees. The Lings then filed chapter 7 bankruptcy, and claimed their entire 37 acre rural property as exempt, even though it was in three different parcels. The McLaughlins objected to the exemption of the parcels that did not include the debtor's actual home.

The bankruptcy court, U.S. Bankruptcy Judge Marvin Isgur, ruled in favor of the debtors. First the court found that all the tracts of land were "contiguous," or adjoining, touching each other. That is important because if all the parcels are contiguous to the actual home parcel, there is a presumption that the contiguous parcels are used for purposes of a home. For non-contiguous tracts, someone claiming homestead must prove to the court that the tract provides some kind of support for the home, like a garden, hunting, fishing, harvesting timber, etc.

The court went on to hold that even if the different tracts of land were not considered contiguous (there was a county road bisecting two of them), there was enough acts of homestead usage that meet the standard of "comfort, convenience, or support of the family" that each of the parcels qualified as homestead, even without the presumption that was extended to contiguous parcels.

So if you have a rural homestead in Texas that is in more than one parcel and you are considering filing bankruptcy, hire a very experienced bankruptcy lawyer to help you file. This can be a very fact-intensive area of the law and you don't want to lose any property in a bankruptcy case if you can help it.

Do you think this opinion is correct? Are Texas exemption laws too liberal? Should people lose more or less property if they file bankruptcy? What about the creditors? Share your comments or opinions below, we'd like to hear them!

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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