That depends.

If you have a lot of equity in your Texas home such that you had to claim the legal exemptions under Texas law, and you sell your home during a bankruptcy, to keep the money or at least the benefit of the money, you may have to re-invest the money in a new homestead within 6 months.

The 5th Circuit Court of Appeals decided a case on March 5, 2014, that if a debtor in bankruptcy sells a home claimed as exempt under Texas law during a bankruptcy case, the proceeds are only exempt for 6 months unless all of the proceeds are reinvested in another Texas homestead. Matter of Frost, 5th Cir. 2014.

In other words, if you are in bankruptcy and have claimed your home as exempt under the Texas exemptions, so long as you stay in your homestead, it is permanently exempt and you cannot be forced to sell it.

But if you sell your home during a bankruptcy in such a case, the proceeds are only exempt for 6 months unless you buy a new homestead and reinvest all the proceeds in the new homestead.

Any amount not used to purchase the new homestead becomes non-exempt, and must be turned over to the trustee for distribution to creditors.

This result does not occur if a Texas debtor claims the "federal" exemptions, but those exemptions limit the homestead exemption to $22,975 in value, for each debtor (double that in a joint case involving husband and wife).

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