Texas has some of the most expansive homestead and personal property creditor protections in the nation. Real property (i.e., real estate) and personal property covered under homestead protection and exemptions are protected from creditor’s claims except for certain types of claims. These protections are found in the Texas Constitution and Texas Property Code. They cover urban real estate, rural real estate, and personal property. This article will discuss the real estate homestead. Personal property creditor protection will be covered in another article.
The Urban Real Estate Homestead.
For real estate in an urban area, the homestead consisting of one or more adjacent lots containing up to 10 acres, is protected from the claims of creditors. Urban real estate must be used as either a home only or as a home and business. For example, an urban real estate homestead could cover a lot containing a home and an adjacent lot containing a business. Real estate is considered urban for homestead protection if it is: (1) within the limits or extraterritorial jurisdiction of a municipality or a platted subdivision; (2) has police protection and paid or volunteer fire protection, and (3) has at least three of these services provided by a municipality or under contract to a municipality: electric, natural gas, sewer, storm sewer, and water.
The Rural Real Estate Homestead.
For real estate in a rural area, the homestead consisting of one or more parcels containing up to 200 acres for a married couple, or up to 100 acres for a single person is protected from the claims of creditors. Real estate is considered rural for homestead protection if it does not meet the definition of an urban homestead. Rural homestead parcels need not be adjacent to the parcel containing the home.
What Types of Liens Can Be Placed on Homestead Property?
Your homestead is not subject to the claims of creditors except under certain circumstances. This means that if you owe someone money, they cannot seize your homestead or force its sale to satisfy the debt. However, certain types of voluntary liens (i.e. mortgages) may be placed on your homestead. They are liens to secure loans for financing the purchase of your homestead or constructing improvements on your homestead or cashing out equity on your homestead by a home equity loan or and reverse mortgage. Valid liens on homestead property also include owelty liens (I will not try to explain what that is in this article) and liens securing loans for the payment of property taxes or a federal tax lien. Various requirements must be met to properly document voluntary liens on homestead property. Additionally, your homestead is subject to sale at a property tax foreclosure sale is you do not pay your property taxes.
