Texas State Bankruptcy Exemptions
Art. XVI, § 50. Homestead; protection from forced sale; mortgages, trust deeds
and liens
Sec. 50. (a) The homestead of a family, or of a single adult person, shall be,
and is hereby protected from forced sale, for the payment of all debts except
for:
(1) the purchase money thereof, or a part of such purchase money;
(2) the taxes due thereon;
(3) an owelty of partition imposed against the entirety of the property by a
court order or by a written agreement of the parties to the partition,
including a debt of one spouse in favor of the other spouse resulting from a
division or an award of a family homestead in a divorce proceeding;
(4) the refinance of a lien against a homestead, including a federal tax lien
resulting from the tax debt of both spouses, if the homestead is a family
homestead, or from the tax debt of the owner;
(5) work and material used in constructing new improvements thereon, if
contracted for in writing, or work and material used to repair or renovate
existing improvements thereon if:
(A) the work and material are contracted for in writing, with the consent of
both spouses, in the case of a family homestead, given in the same manner as is
required in making a sale and conveyance of the homestead;
(B) the contract for the work and material is not executed by the owner or the
owner's spouse before the fifth day after the owner makes written application
for any extension of credit for the work and material, unless the work and
material are necessary to complete immediate repairs to conditions on the
homestead property that materially affect the health or safety of the owner or
person residing in the homestead and the owner of the homestead acknowledges
such in writing;
(C) the contract for the work and material expressly provides that the owner
may rescind the contract without penalty or charge within three days after the
execution of the contract by all parties, unless the work and material are
necessary to complete immediate repairs to conditions on the homestead property
that materially affect the health or safety of the owner or person residing in
the homestead and the owner of the homestead acknowledges such in writing; and
(D) the contract for the work and material is executed by the owner and the
owner's spouse only at the office of a third-party lender making an extension
of credit for the work and material, an attorney at law, or a title company;
(6) an extension of credit that:
(A) is secured by a voluntary lien on the homestead created under a written
agreement with the consent of each owner and each owner's spouse;
(B) is of a principal amount that when added to the aggregate total of the
outstanding principal balances of all other indebtedness secured by valid
encumbrances of record against the homestead does not exceed 80 percent of the
fair market value of the homestead on the date the extension of credit is made;
(C) is without recourse for personal liability against each owner and the
spouse of each owner, unless the owner or spouse obtained the extension of
credit by actual fraud;
(D) is secured by a lien that may be foreclosed upon only by a court order;
(E) does not require the owner or the owner's spouse to pay, in addition to any
interest, fees to any person that are necessary to originate, evaluate,
maintain, record, insure, or service the extension of credit that exceed, in
the aggregate, three percent of the original principal amount of the extension
of credit;
(F) is not a form of open-end account that may be debited from time to time or
under which credit may be extended from time to time unless the open-end
account is a home equity line of credit;
(G) is payable in advance without penalty or other charge;
(H) is not secured by any additional real or personal property other than the
homestead;
(I) is not secured by homestead property designated for agricultural use as
provided by statutes governing property tax, unless such homestead property is
used primarily for the production of milk;
(J) may not be accelerated because of a decrease in the market value of the
homestead or because of the owner's default under other indebtedness not
secured by a prior valid encumbrance against the homestead;
(K) is the only debt secured by the homestead at the time the extension of
credit is made unless the other debt was made for a purpose described by
Subsections (a)(1)-(a)(5) or Subsection (a)(8) of this section;
(L) is scheduled to be repaid:
(i) in substantially equal successive periodic installments, not more often
than every 14 days and not less often than monthly, beginning no later than two
months from the date the extension of credit is made, each of which equals or
exceeds the amount of accrued interest as of the date of the scheduled
installment; or
(ii) if the extension of credit is a home equity line of credit, in periodic
payments described under Subsection (t)(8) of this section;
(M) is closed not before:
(i) the 12th day after the later of the date that the owner of the homestead
submits an application to the lender for the extension of credit or the date
that the lender provides the owner a copy of the notice prescribed by
Subsection (g) of this section;
(ii) one business day after the date that the owner of the homestead receives a
final itemized disclosure of the actual fees, points, interest, costs, and
charges that will be charged at closing. If a bona fide emergency or another
good cause exists and the lender obtainsthe written consent of the owner, the
lender may provide the documentation to the owner or the lender may modify
previously provided documentation on the date of closing; and
(iii) the first anniversary of the closing date of any other extension of
credit described by Subsection (a)(6) of this section secured by the same
homestead property, except a refinance described by Paragraph (Q)(x)(f) of this
subdivision;
(N) is closed only at the office of the lender, an attorney at law, or a title
company;
(O) permits a lender to contract for and receive any fixed or variable rate of
interest authorized under statute;
(P) is made by one of the following that has not been found by a federal
regulatory agency to have engaged in the practice of refusing to make loans
because the applicants for the loans reside or the property proposed to secure
the loans is located in a certain area:
(i) a bank, savings and loan association, savings bank, or credit union doing
business under the laws of this state or the United States;
(ii) a federally chartered lending instrumentality or a person approved as a
mortgagee by the United States government to make federally insured loans;
(iii) a person licensed to make regulated loans, as provided by statute of this
state;
(iv) a person who sold the homestead property to the current owner and who
provided all or part of the financing for the purchase;
(v) a person who is related to the homestead property owner within the second
degree of affinity or consanguinity; or
(vi) a person regulated by this state as a mortgage broker; and
(Q) is made on the condition that:
(i) the owner of the homestead is not required to apply the proceeds of the
extension of credit to repay another debt except debt secured by the homestead
or debt to another lender;
(ii) the owner of the homestead not assign wages as security for the extension
of credit;
(iii) the owner of the homestead not sign any instrument in which blanks are
left to be filled in;
(iv) the owner of the homestead not sign a confession of judgment or power of
attorney to the lender or to a third person to confess judgment or to appear
for the owner in a judicial proceeding;
(v) the lender, at the time the extension of credit is made, provide the owner
of the homestead a copy of all documents signed by the owner related to the
extension of credit;
(vi) the security instruments securing the extension of credit contain a
disclosure that the extension of credit is the type of credit defined by
Section 50(a)(6), Article XVI, Texas Constitution;
(vii) within a reasonable time after termination and full payment of the
extension of credit, the lender cancel and return the promissory note to the
owner of the homestead and give the owner, in recordable form, a release of the
lien securing the extension of credit or a copy of an endorsement and
assignment of the lien to a lender that is refinancing the extension of credit;
(viii) the owner of the homestead and any spouse of the owner may, within three
days after the extension of credit is made, rescind the extension of credit
without penalty or charge;
(ix) the owner of the homestead and the lender sign a written acknowledgment as
to the fair market value of the homestead property on the date the extension of
credit is made;
(x) except as provided by Subparagraph (xi) of this paragraph, the lender or
any holder of the note for the extension of credit shall forfeit all principal
and interest of the extension of credit if the lender or holder fails to comply
with the lender's or holder's obligations under the extension of credit and
fails to correct the failure to comply not later than the 60th day after the
date the lender or holder is notified by the borrower of the lender's failure
to comply by:
(a) paying to the owner an amount equal to any overcharge paid by the owner
under or related to the extension of credit if the owner has paid an amount
that exceeds an amount stated in the applicable Paragraph (E), (G), or (O) of
this subdivision;
(b) sending the owner a written acknowledgement that the lien is valid only in
the amount that the extension of credit does not exceed the percentage
described by Paragraph (B) of this subdivision, if applicable, or is not
secured by property described under Paragraph (H) or (I) of this subdivision,
if applicable;
(c) sending the owner a written notice modifying any other amount, percentage,
term, or other provision prohibited by this section to a permitted amount,
percentage, term, or other provision and adjusting the account of the borrower
to ensure that the borrower is not required to pay more than an amount
permitted by this section and is not subject to any other term or provision
prohibited by this section;
(d) delivering the required documents to the borrower if the lender fails to
comply with Subparagraph (v) of this paragraph or obtaining the appropriate
signatures if the lender fails to comply with Subparagraph (ix) of this
paragraph;
(e) sending the owner a written acknowledgement, if the failure to comply is
prohibited by Paragraph (K) of this subdivision, that the accrual of interest
and all of the owner's obligations under the extension of credit are abated
while any prior lien prohibited under Paragraph (K) remains secured by the
homestead; or
(f) if the failure to comply cannot be cured under Subparagraphs (x)(a)-(e) of
this paragraph, curing the failure to comply by a refund or credit to the owner
of $ 1,000 and offering the owner the right to refinance the extension of
credit with the lender or holder for the remaining term of the loan at no cost
to the owner on the same terms, including interest, as the original extension
of credit with any modifications necessary to comply with this section or on
terms on which the owner and the lender or holder otherwise agree that comply
with this section; and
(xi) the lender or any holder of the note for the extension of credit shall
forfeit all principal and interest of the extension of credit if the extension
of credit is made by a person other than a person described under Paragraph (P)
of this subdivision or if the lien was not created under a written agreement
with the consent of each owner and each owner's spouse, unless each owner and
each owner's spouse who did not initially consent subsequently consents;
(7) a reverse mortgage; or
(8) the conversion and refinance of a personal property lien secured by a
manufactured home to a lien on real property, including the refinance of the
purchase price of the manufactured home, the cost of installing the
manufactured home on the real property, and the refinance of the purchase price
of the real property.
(b) An owner or claimant of the property claimed as homestead may not sell or
abandon the homestead without the consent of each owner and the spouse of each
owner, given in such manner as may be prescribed by law.
(c) No mortgage, trust deed, or other lien on the homestead shall ever be valid
unless it secures a debt described by this section, whether such mortgage,
trust deed, or other lien, shall have been created by the owner alone, or
together with his or her spouse, in case the owner is married. All pretended
sales of the homestead involving any condition of defeasance shall be void.
(d) A purchaser or lender for value without actual knowledge may conclusively
rely on an affidavit that designates other property as the homestead of the
affiant and that states that the property to be conveyed or encumbered is not
the homestead of the affiant.
(e) A refinance of debt secured by a homestead and described by any subsection
under Subsections (a)(1)-(a)(5) that includes the advance of additional funds
may not be secured by a valid lien against the homestead unless:
(1) the refinance of the debt is an extension of credit described by Subsection
(a)(6) of this section; or
(2) the advance of all the additional funds is for reasonable costs necessary
to refinance such debt or for a purpose described by Subsection (a)(2), (a)(3),
or (a)(5) of this section.
(f) A refinance of debt secured by the homestead, any portion of which is an
extension of credit described by Subsection (a)(6) of this section, may not be
secured by a valid lien against the homestead unless the refinance of the debt
is an extension of credit described by Subsection (a)(6) or (a)(7) of this
section.
(g) An extension of credit described by Subsection (a)(6) of this section may be
secured by a valid lien against homestead property if the extension of credit
is not closed before the 12th day after the lender provides the owner with the
following written notice on a separate instrument:
"NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6),
ARTICLE XVI, TEXAS CONSTITUTION:
"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION ALLOWS CERTAIN LOANS
TO BE SECURED AGAINST THE EQUITY IN YOUR HOME. SUCH LOANS ARE COMMONLY KNOWN AS
EQUITY LOANS. IF YOU DO NOT REPAY THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF
THE LOAN, THE LENDER MAY FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION
PROVIDES THAT:
"(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE CONSENT OF EACH OWNER OF
YOUR HOME AND EACH OWNER'S SPOUSE;
"(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE MUST NOT EXCEED AN
AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL BALANCES OF ALL OTHER LIENS AGAINST
YOUR HOME, IS MORE THAN 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;
"(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL LIABILITY AGAINST YOU AND
YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE OBTAINED THIS EXTENSION OF CREDIT BY
ACTUAL FRAUD;
"(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON ONLY WITH A COURT ORDER;
"(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 3 PERCENT OF THE LOAN
AMOUNT;
"(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY BE DEBITED FROM TIME TO
TIME OR UNDER WHICH CREDIT MAY BE EXTENDED FROM TIME TO TIME UNLESS IT IS A
HOME EQUITY LINE OF CREDIT;
"(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR CHARGE;
"(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE LOAN;
"(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL HOMESTEAD PROPERTY, UNLESS THE
AGRICULTURAL HOMESTEAD PROPERTY IS USED PRIMARILY FOR THE PRODUCTION OF MILK;
"(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER THAN AGREED SOLELY BECAUSE
THE FAIR MARKET VALUE OF YOUR HOME DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER
LOAN THAT IS NOT SECURED BY YOUR HOME;
"(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
CONSTITUTION MAY BE SECURED WITH YOUR HOME AT ANY GIVEN TIME;
"(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN PAYMENTS THAT EQUAL OR EXCEED
THE AMOUNT OF ACCRUED INTEREST FOR EACH PAYMENT PERIOD;
"(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU SUBMIT A WRITTEN
APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER YOU RECEIVE THIS NOTICE,
WHICHEVER DATE IS LATER; AND IF YOUR HOME WAS SECURITY FOR THE SAME TYPE OF
LOAN WITHIN THE PAST YEAR, A NEW LOAN SECURED BY THE SAME PROPERTY MAY NOT
CLOSE BEFORE ONE YEAR HAS PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
"(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER, TITLE COMPANY, OR AN
ATTORNEY AT LAW;
"(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE OF INTEREST AUTHORIZED BY
STATUTE;
"(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS DESCRIBED BY SECTION
50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
CONSTITUTION MUST:
"(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO ANOTHER DEBT EXCEPT A DEBT THAT
IS SECURED BY YOUR HOME OR OWED TO ANOTHER LENDER;
"(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS SECURITY;
"(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS WHICH HAVE BLANKS LEFT TO BE
FILLED IN;
"(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF JUDGMENT OR POWER OF ATTORNEY TO
ANOTHER PERSON TO CONFESS JUDGMENT OR APPEAR IN A LEGAL PROCEEDING ON YOUR
BEHALF;
"(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL DOCUMENTS YOU SIGN AT CLOSING;
"(6) PROVIDE THAT THE SECURITY INSTRUMENTS CONTAIN A DISCLOSURE THAT THIS LOAN
IS A LOAN DEFINED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
"(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL, THE LENDER WILL SIGN AND GIVE
YOU A RELEASE OF LIEN OR AN ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
"(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER CLOSING, RESCIND THE LOAN
WITHOUT PENALTY OR CHARGE;
"(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE THE FAIR MARKET VALUE OF YOUR
HOME ON THE DATE THE LOAN CLOSES; AND
"(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL PRINCIPAL AND INTEREST IF THE
LENDER FAILS TO COMPLY WITH THE LENDER'S OBLIGATIONS UNLESS THE LENDER CURES
THE FAILURE TO COMPLY AS PROVIDED BY SECTION 50(a)(6)(Q)(x), ARTICLE XVI, OF
THE TEXAS CONSTITUTION; AND
"(R) IF THE LOAN IS A HOME EQUITY LINE OF CREDIT:
"(1) YOU MAY REQUEST ADVANCES, REPAY MONEY, AND REBORROW MONEY UNDER THE LINE
OF CREDIT;
"(2) EACH ADVANCE UNDER THE LINE OF CREDIT MUST BE IN AN AMOUNT OF AT LEAST $
4,000;
"(3) YOU MAY NOT USE A CREDIT CARD, DEBIT CARD, SOLICITATION CHECK, OR SIMILAR
DEVICE TO OBTAIN ADVANCES UNDER THE LINE OF CREDIT;
"(4) ANY FEES THE LENDER CHARGES MAY BE CHARGED AND COLLECTED ONLY AT THE TIME
THE LINE OF CREDIT IS ESTABLISHED AND THE LENDER MAY NOT CHARGE A FEE IN
CONNECTION WITH ANY ADVANCE;
"(5) THE MAXIMUM PRINCIPAL AMOUNT THAT MAY BE EXTENDED, WHEN ADDED TO ALL OTHER
DEBTS SECURED BY YOUR HOME, MAY NOT EXCEED 80 PERCENT OF THE FAIR MARKET VALUE
OF YOUR HOME ON THE DATE THE LINE OF CREDIT IS ESTABLISHED;
"(6) IF THE PRINCIPAL BALANCE UNDER THE LINE OF CREDIT AT ANY TIME EXCEEDS 50
PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME, AS DETERMINED ON THE DATE THE
LINE OF CREDIT IS ESTABLISHED, YOU MAY NOT CONTINUE TO REQUEST ADVANCES UNDER
THE LINE OF CREDIT UNTIL THE BALANCE IS LESS THAN 50 PERCENT OF THE FAIR MARKET
VALUE; AND
"(7) THE LENDER MAY NOT UNILATERALLY AMEND THE TERMS OF THE LINE OF CREDIT.
"THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS CONSTITUTION.
YOUR RIGHTS ARE GOVERNED BY SECTION 50, ARTICLE XVI, OF THE TEXAS CONSTITUTION,
AND NOT BY THIS NOTICE."
If the discussions with the borrower are conducted primarily in a language
other than English, the lender shall, before closing, provide an additional
copy of the notice translated into the written language in which the
discussions were conducted.
(h) A lender or assignee for value may conclusively rely on the written
acknowledgment as to the fair market value of the homestead property made in
accordance with Subsection (a)(6)(Q)(ix) of this section if:
(1) the value acknowledged to is the value estimate in an appraisal or
evaluation prepared in accordance with a state or federal requirement
applicable to an extension of credit under Subsection (a)(6); and
(2) the lender or assignee does not have actual knowledge at the time of the
payment of value or advance of funds by the lender or assignee that the fair
market value stated in the written acknowledgment was incorrect.
(i) This subsection shall not affect or impair any right of the borrower to
recover damages from the lender or assignee under applicable law for wrongful
foreclosure. A purchaser for value without actual knowledge may conclusively
presume that a lien securing an extension of credit described by Subsection
(a)(6) of this section was a valid lien securing the extension of credit with
homestead property if:
(1) the security instruments securing the extension of credit contain a
disclosure that the extension of credit secured by the lien was the type of
credit defined by Section 50(a)(6), Article XVI, Texas Constitution;
(2) the purchaser acquires the title to the property pursuant to or after the
foreclosure of the voluntary lien; and
(3) the purchaser is not the lender or assignee under the extension of credit.
(j) Subsection (a)(6) and Subsections (e)-(i) of this section are not
severable, and none of those provisions would have been enacted without the
others. If any of those provisions are held to be preempted by the laws of the
United States, all of those provisions are invalid. This subsection shall not
apply to any lien or extension of credit made after January 1, 1998, and before
the date any provision under Subsection (a)(6) or Subsections (e)-(i) is held
to be preempted.
(k) "Reverse mortgage" means an extension of credit:
(1) that is secured by a voluntary lien on homestead property created by a
written agreement with the consent of each owner and each owner's spouse;
(2) that is made to a person who is or whose spouse is 62 years or older;
(3) that is made without recourse for personal liability against each owner and
the spouse of each owner;
(4) under which advances are provided to a borrower based on the equity in a
borrower's homestead;
(5) that does not permit the lender to reduce the amount or number of advances
because of an adjustment in the interest rate if periodic advances are to be
made;
(6) that requires no payment of principal or interest until:
(A) all borrowers have died;
(B) the homestead property securing the loan is sold or otherwise transferred;
(C) all borrowers cease occupying the homestead property for a period of longer
than 12 consecutive months without prior written approval from the lender; or
(D) the borrower:
(i) defaults on an obligation specified in the loan documents to repair and
maintain, pay taxes and assessments on, or insure the homestead property;
(ii) commits actual fraud in connection with the loan; or
(iii) fails to maintain the priority of the lender's lien on the homestead
property, after the lender gives notice to the borrower, by promptly
discharging any lien that has priority or may obtain priority over the lender's
lien within 10 days after the date the borrower receives the notice, unless the
borrower:
(a) agrees in writing to the payment of the obligation secured by the lien in a
manner acceptable to the lender;
(b) contests in good faith the lien by, or defends against enforcement of the
lien in, legal proceedings so as to prevent the enforcement of the lien or
forfeiture of any part of the homestead property; or
(c) secures from the holder of the lien an agreement satisfactory to the lender
subordinating the lien to all amounts secured by the lender's lien on the
homestead property;
(7) that provides that if the lender fails to make loan advances as required in
the loan documents and if the lender fails to cure the default as required in
the loan documents after notice from the borrower, the lender forfeits all
principal and interest of the reverse mortgage, provided, however, that this
subdivision does not apply when a governmental agency or instrumentality takes
an assignment of the loan in order to cure the default;
(8) that is not made unless the owner of the homestead attests in writing that
the owner received counseling regarding the advisability and availability of
reverse mortgages and other financial alternatives;
(9) that requires the lender, at the time the loan is made, to disclose to the
borrower by written notice the specific provisions contained in Subdivision (6)
of this subsection under which the borrower is required to repay the loan;
(10) that does not permit the lender to commence foreclosure until the lender
gives notice to the borrower, in the manner provided for a notice by mail
related to the foreclosure of liens under Subsection (a)(6) of this section,
that a ground for foreclosure exists and gives the borrower at least 30 days,
or at least 20 days in the event of a default under Subdivision (6)(D)(iii) of
this subsection, to:
(A) remedy the condition creating the ground for foreclosure;
(B) pay the debt secured by the homestead property from proceeds of the sale of
the homestead property by the borrower or from any other sources; or
(C) convey the homestead property to the lender by a deed in lieu of
foreclosure; and
(11) that is secured by a lien that may be foreclosed upon only by a court
order, if the foreclosure is for a ground other than a ground stated by
Subdivision (6)(A) or (B) of this subsection.
(l) Advances made under a reverse mortgage and interest on those advances have
priority over a lien filed for record in the real property records in the
county where the homestead property is located after the reverse mortgage is
filed for record in the real property records of that county.
(m) A reverse mortgage may provide for an interest rate that is fixed or
adjustable and may also provide for interest that is contingent on appreciation
in the fair market value of the homestead property. Although payment of
principal or interest shall not be required under a reverse mortgage until the
entire loan becomes due and payable, interest may accrue and be compounded
during the term of the loan as provided by the reverse mortgage loan agreement.
(n) A reverse mortgage that is secured by a valid lien against homestead
property may be made or acquired without regard to the following provisions of
any other law of this state:
(1) a limitation on the purpose and use of future advances or other mortgage
proceeds;
(2) a limitation on future advances to a term of years or a limitation on the
term of open-end account advances;
(3) a limitation on the term during which future advances take priority over
intervening advances;
(4) a requirement that a maximum loan amount be stated in the reverse mortgage
loan documents;
(5) a prohibition on balloon payments;
(6) a prohibition on compound interest and interest on interest;
(7) a prohibition on contracting for, charging, or receiving any rate of
interest authorized by any law of this state authorizing a lender to contract
for a rate of interest; and
(8) a requirement that a percentage of the reverse mortgage proceeds be
advanced before the assignment of the reverse mortgage.
(o) For the purposes of determining eligibility under any statute relating to
payments, allowances, benefits, or services provided on a means-tested basis by
this state, including supplemental security income, low-income energy
assistance, property tax relief, medical assistance, and general assistance:
(1) reverse mortgage loan advances made to a borrower are considered proceeds
from a loan and not income; and
(2) undisbursed funds under a reverse mortgage loan are considered equity in a
borrower's home and not proceeds from a loan.
(p) The advances made on a reverse mortgage loan under which more than one
advance is made must be made according to the terms established by the loan
documents by one or more of the following methods:
(1) at regular intervals;
(2) at regular intervals in which the amounts advanced may be reduced, for one
or more advances, at the request of the borrower; or
(3) at any time by the lender, on behalf of the borrower, if the borrower fails
to timely pay any of the following that the borrower is obligated to pay under
the loan documents to the extent necessary to protect the lender's interest in
or the value of the homestead property:
(A) taxes;
(B) insurance;
(C) costs of repairs or maintenance performed by a person or company that is
not an employee of the lender or a person or company that directly or
indirectly controls, is controlled by, or is under common control with the
lender;
(D) assessments levied against the homestead property; and
(E) any lien that has, or may obtain, priority over the lender's lien as it is
established in the loan documents.
(q) To the extent that any statutes of this state, including without
limitation, Section 41.001 of the Texas Property Code, purport to limit
encumbrances that may properly be fixed on homestead property in a manner that
does not permit encumbrances for extensions of credit described in Subsection
(a)(6) or (a)(7) of this section, the same shall be superseded to the extent
that such encumbrances shall be permitted to be fixed upon homestead property
in the manner provided for by this amendment.
(r) The supreme court shall promulgate rules of civil procedure for expedited
foreclosure proceedings related to the foreclosure of liens under Subsection
(a)(6) of this section and to foreclosure of a reverse mortgage lien that
requires a court order.
(s) The Finance Commission of Texas shall appoint a director to conduct
research on the availability, quality, and prices of financial services and
research the practices of business entities in the state that provide financial
services under this section. The director shall collect information and produce
reports on lending activity of those making loans under this section. The
director shall report his or her findings to the legislature not later than
December 1 of each year.
(t) A home equity line of credit is a form of an open-end account that may be
debited from time to time, under which credit may be extended from time to time
and under which:
(1) the owner requests advances, repays money, and reborrows money;
(2) any single debit or advance is not less than $ 4,000;
(3) the owner does not use a credit card, debit card, preprinted solicitation
check, or similar device to obtain an advance;
(4) any fees described by Subsection (a)(6)(E) of this section are charged and
collected only at the time the extension of credit is established and no fee is
charged or collected in connection with any debit or advance;
(5) the maximum principal amount that may be extended under the account, when
added to the aggregate total of the outstanding principal balances of all
indebtedness secured by the homestead on the date the extension of credit is
established, does not exceed an amount described under Subsection (a)(6)(B) of
this section;
(6) no additional debits or advances are made if the total principal amount
outstanding exceeds an amount equal to 50 percent of the fair market value of
the homestead as determined on the date the account is established;
(7) the lender or holder may not unilaterally amend the extension of credit;
and
(8) repayment is to be made in regular periodic installments, not more often
than every 14 days and not less often than monthly, beginning not later than
two months from the date the extension of credit is established, and:
(A) during the period during which the owner may request advances, each
installment equals or exceeds the amount of accrued interest; and
(B) after the period during which the owner may request advances, installments
are substantially equal.
(u) The legislature may by statute delegate one or more state agencies the
power to interpret Subsections (a)(5)-(a)(7), (e)-(p), and (t), of this
section. An act or omission does not violate a provision included in those
subsections if the act or omission conforms to an interpretation of the
provision that is:
(1) in effect at the time of the act or omission; and
(2) made by a state agency to which the power of interpretation is delegated as
provided by this subsection or by an appellate court of this state or the
United States.
Art. XVI, § 51. Amount of homestead; uses
Sec. 51. The homestead, not in a town or city, shall consist of not more than
two hundred acres of land, which may be in one or more parcels, with the
improvements thereon; the homestead in a city, town or village, shall consist
of lot or contiguous lots amounting to not more than 10 acres of land, together
with any improvements on the land; provided, that the homestead in a city, town
or village shall be used for the purposes of a home, or as both an urban home
and a place to exercise a calling or business, of the homestead claimant,
whether a single adult person, or the head of a family; provided also, that any
temporary renting of the homestead shall not change the character of the same,
when no other homestead has been acquired; provided further that a release or
refinance of an existing lien against a homestead as to a part of the homestead
does not create an additional burden on the part of the homestead property that
is unreleased or subject to the refinance, and a new lien is not invalid only
for that reason.
Prop. Code § 41.001. Interests in Land Exempt from Seizure
(a) A homestead and one or more lots used for a place of burial of the dead are
exempt from seizure for the claims of creditors except for encumbrances
properly fixed on homestead property.
(b) Encumbrances may be properly fixed on homestead property for:
(1) purchase money;
(2) taxes on the property;
(3) work and material used in constructing improvements on the property
if contracted for in writing as provided by Sections 53.254(a), (b),
and (c);
(4) an owelty of partition imposed against the entirety of the property
by a court order or by a written agreement of the parties to the
partition, including a debt of one spouse in favor of the other spouse
resulting from a division or an award of a family homestead in a
divorce proceeding;
(5) the refinance of a lien against a homestead, including a federal
tax lien resulting from the tax debt of both spouses, if the homestead
is a family homestead, or from the tax debt of the owner;
(6) an extension of credit that meets the requirements of Section
50(a)(6), Article XVI, Texas Constitution; or
(7) a reverse mortgage that meets the requirements of Sections
50(k)-(p), Article XVI, Texas Constitution.
(c) The homestead claimant's proceeds of a sale of a homestead are not subject
to seizure for a creditor's claim for six months after the date of sale.
Prop. Code § 41.002. Definition of Homestead
(a) If used for the purposes of an urban home or as both an urban home and a
place to exercise a calling or business, the homestead of a family or a single,
adult person, not otherwise entitled to a homestead, shall consist of not more
than 10 acres of land which may be in one or more contiguous lots, together
with any improvements thereon.
(b) If used for the purposes of a rural home, the homestead shall consist of:
(1) for a family, not more than 200 acres, which may be in one or more
parcels, with the improvements thereon; or
(2) for a single, adult person, not otherwise entitled to a homestead,
not more than 100 acres, which may be in one or more parcels, with the
improvements thereon.
(c) A homestead is considered to be urban if, at the time the designation is
made, the property is:
(1) located within the limits of a municipality or its extraterritorial
jurisdiction or a platted subdivision; and
(2) served by police protection, paid or volunteer fire protection, and
at least three of the following services provided by a municipality or
under contract to a municipality:
(A) electric;
(B) natural gas;
(C) sewer;
(D) storm sewer; and
(E) water.
(d) The definition of a homestead as provided in this section applies to all
homesteads in this state whenever created.
Prop. Code § 42.001. Personal Property Exemption
(a) Personal property, as described in Section 42.002, is exempt from
garnishment, attachment, execution, or other seizure if:
(1) the property is provided for a family and has an aggregate fair
market value of not more than $ 60,000, exclusive of the amount of any
liens, security interests, or other charges encumbering the property;
or
(2) the property is owned by a single adult, who is not a member of a
family, and has an aggregate fair market value of not more than $
30,000, exclusive of the amount of any liens, security interests, or
other charges encumbering the property.
(b) The following personal property is exempt from seizure and is not included
in the aggregate limitations prescribed by Subsection (a):
(1) current wages for personal services, except for the enforcement of
court-ordered child support payments;
(2) professionally prescribed health aids of a debtor or a dependent of
a debtor; and
(3) alimony, support, or separate maintenance received or to be
received by the debtor for the support of the debtor or a dependent of
the debtor.
(c) This section does not prevent seizure by a secured creditor with a
contractual landlord's lien or other security in the property to be seized.
(d) Unpaid commissions for personal services not to exceed 25 percent of the
aggregate limitations prescribed by Subsection (a) are exempt from seizure and
are included in the aggregate.
Prop. Code § 42.002. Personal Property
(a) The following personal property is exempt under Section 42.001(a):
(1) home furnishings, including family heirlooms;
(2) provisions for consumption;
(3) farming or ranching vehicles and implements;
(4) tools, equipment, books, and apparatus, including boats and motor
vehicles used in a trade or profession;
(5) wearing apparel;
(6) jewelry not to exceed 25 percent of the aggregate limitations
prescribed by Section 42.001(a);
(7) two firearms;
(8) athletic and sporting equipment, including bicycles;
(9) a two-wheeled, three-wheeled, or four-wheeled motor vehicle for
each member of a family or single adult who holds a driver's license or
who does not hold a driver's license but who relies on another person
to operate the vehicle for the benefit of the nonlicensed person;
(10) the following animals and forage on hand for their consumption:
(A) two horses, mules, or donkeys and a saddle, blanket, and bridle
for each;
(B) 12 head of cattle;
(C) 60 head of other types of livestock; and
(D) 120 fowl; and
(11) household pets.
(b) Personal property, unless precluded from being encumbered by other law, may
be encumbered by a security interest under Subchapter B, Chapter 9, Business
& Commerce Code, or Subchapter F, Chapter 501, Transportation Code, or by a
lien fixed by other law, and the security interest or lien may not be avoided
on the ground that the property is exempt under this chapter.
Prop. Code § 42.0021. Additional Exemption for Retirement Plan
(a) In addition to the exemption prescribed by Section 42.001, a person's right
to the assets held in or to receive payments, whether vested or not, under any
stock bonus, pension, profit-sharing, or similar plan, including a retirement
plan for self-employed individuals, and under any annuity or similar contract
purchased with assets distributed from that type of plan, and under any
retirement annuity or account described by Section 403(b) or 408A of the
Internal Revenue Code of 1986, and under any individual retirement account or
any individual retirement annuity, including a simplified employee pension
plan, is exempt from attachment, execution, and seizure for the satisfaction of
debts unless the plan, contract, or account does not qualify under the
applicable provisions of the Internal Revenue Code of 1986. A person's right to
the assets held in or to receive payments, whether vested or not, under a
government or church plan or contract is also exempt unless the plan or
contract does not qualify under the definition of a government or church plan
under the applicable provisions of the federal Employee Retirement Income
Security Act of 1974. If this subsection is held invalid or preempted by
federal law in whole or in part or in certain circumstances, the subsection
remains in effect in all other respects to the maximum extent permitted by law.
(b) Contributions to an individual retirement account, other than contributions
to a Roth IRA described in Section 408A, Internal Revenue Code of 1986, or
annuity that exceed the amounts deductible under the applicable provisions of
the Internal Revenue Code of 1986 and any accrued earnings on such
contributions are not exempt under this section unless otherwise exempt by law.
Amounts qualifying as nontaxable rollover contributions under Section
402(a)(5), 403(a)(4), 403(b)(8), or 408(d)(3) of the Internal Revenue Code of
1986 before January 1, 1993, are treated as exempt amounts under Subsection
(a). Amounts treated as qualified rollover contributions under Section 408A,
Internal Revenue Code of 1986, are treated as exempt amounts under Subsection
(a). In addition, amounts qualifying as nontaxable rollover contributions under
Section 402(c), 402(e)(6), 402(f), 403(a)(4), 403(a)(5), 403(b)(8), 403(b)(10),
408(d)(3), or 408A of the Internal Revenue Code of 1986 on or after January 1,
1993, are treated as exempt amounts under Subsection (a).
(c) Amounts distributed from a plan or contract entitled to the exemption under
Subsection (a) are not subject to seizure for a creditor's claim for 60 days
after the date of distribution if the amounts qualify as a nontaxable rollover
contribution under Subsection (b).
(d) A participant or beneficiary of a stock bonus, pension, profit-sharing,
retirement plan, or government plan is not prohibited from granting a valid and
enforceable security interest in the participant's or beneficiary's right to
the assets held in or to receive payments under the plan to secure a loan to
the participant or beneficiary from the plan, and the right to the assets held
in or to receive payments from the plan is subject to attachment, execution,
and seizure for the satisfaction of the security interest or lien granted by
the participant or beneficiary to secure the loan.
(e) If Subsection (a) is declared invalid or preempted by federal law, in whole
or in part or in certain circumstances, as applied to a person who has not
brought a proceeding under Title 11, United States Code, the subsection remains
in effect, to the maximum extent permitted by law, as to any person who has
filed that type of proceeding.
(f) A reference in this section to a specific provision of the Internal Revenue
Code of 1986 includes a subsequent amendment of the substance of that
provision.
Prop. Code § 42.0022. Exemption for College Savings Plans
(a) In addition to the exemption prescribed by Section 42.001, a person's right
to the assets held in or to receive payments or benefits under any of the
following is exempt from attachment, execution, and seizure for the
satisfaction of debts:
(1) any fund or plan established under Subchapter F, Chapter 54,
Education Code, including the person's interest in a prepaid tuition
contract;
(2) any fund or plan established under Subchapter G, Chapter 54,
Education Code, including the person's interest in a savings trust
account; or
(3) any qualified tuition program of any state that meets the
requirements of Section 529, Internal Revenue Code of 1986, as amended.
(b) If any portion of this section is held to be invalid or preempted by
federal law in whole or in part or in certain circumstances, this section
remains in effect in all other respects to the maximum extent permitted by law.
Lab. Code § 207.075. Assignment of Benefits Prohibited; Benefit Exemptions
(a) An assignment, pledge, or encumbrance of a right to benefits is not valid.
(b) A right to benefits is exempt from levy, execution, attachment, or any
other remedy for debt collection.
(c) Benefits received by an individual are exempt from debt collection if the
benefits are not mingled with other funds of the individual except for debts
incurred for necessaries furnished to the individual or the individual's spouse
or dependents during the time that the individual was unemployed.
(d) A waiver of an exemption provided by this section is not valid.
(e) Subchapter E prevails over this section to the extent of any conflict.
Lab. Code § 408.201. Benefits Exempt From Legal Process
Benefits are exempt from:
(1) garnishment;
(2) attachment;
(3) judgment; and
(4) other actions or claims.
Hum. Res. Code § 31.040. Nontransferability of Assistance Funds
The right to financial assistance granted to recipients under this chapter may
not be transferred or assigned at law or in equity, and the funds are not
subject to execution, levy, attachment, garnishment, or other legal process or
to the operation of an insolvency law.
Hum. Res. Code § 32.036. Program Payments Nonassignable and Exempt from Legal
Process
(a) Neither medical assistance nor payments to providers of medical assistance
under this chapter are transferable or assignable at law or in equity.
(b) No money paid or payable under the provisions of this chapter is subject to
execution, levy, attachment, garnishment, or any other legal process, or the
operation of any insolvency law.
(c) This section does not apply to the extent that it conflicts with the Social
Security Act (42 U.S.C. Section 1396a(a)(32)).
Note: Exemptions may have changed since our last update. For the latest updates on these property exemptions, speak to a local bankruptcy lawyer.
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