Chapter 3-4 Exemptions from Judgment

• Jurisdiction: United States

3-4 Exemptions from Judgment

States that have enacted homestead laws have done so to protect homesteads from judgments in favor of creditors to the detriment of homeowners. Texas law takes these exemptions further, exempting from judgment homesteads, personal property, and even some insurance and retirement funds.

3-4:1 The Homestead Exemption from Judgment

Perhaps the biggest advantage of the homestead laws found in the Texas Constitution and the Texas Property Code is the protection they give to homesteads—urban and rural—from the claims of most creditors. Hence, if, for example, a homeowner gets into a dispute with a creditor over a large bill and the creditor obtains a court judgment requiring the homeowner to pay, except in certain circumstances discussed below, the creditor can collect against anything owned by the homeowner, but not against the homestead.³⁷ Accordingly, the creditor is not allowed to leave the homeowner homeless.

3-4:1.1 Valid Liens Against the Homestead

Still, protection of one's homestead is not universal. Texas law allows eight reasons whereby encumbrances may be properly fixed on homestead property and the homestead may be seized for non-payment thereof. These eight situations are:³⁸

1. Failure to repay a mortgage or home improvement loan. The Texas Property Code allows a lender to foreclose on a homestead for failure to pay back purchase money or money a homeowner borrowed for home improvements.

2. Failure to pay taxes. The federal or local government can seize one's homestead for failure to pay taxes. As regards Texas property taxes, as we have already discovered, homeowners aged 65 and older have some protection in that their homesteads cannot be seized for failure to pay Texas property taxes if they file for a deferral of tax or an abatement of collection.³⁹ However, pursuant to the Supremacy Clause of the U.S. Constitution,⁴⁰ a federal tax lien perfected by the Internal Revenue Service is not affected by the Texas deferral or abatement procedure.

3. The imposition of an "owelty of partition" against the entirety of the homestead 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 resulting from a division of, or an award of, a family homestead in a divorce proceeding.

4. The refinance of a lien against the 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. Failure to pay a contractor

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