The 2026 Federal & State Bankruptcy Exemptions Reality Check

Quick Recap:

The federal and Texas bankruptcy exemptions were adjusted for inflation on April 1, 2025. These updated numbers determine what you can protect when filing in 2026. Key categories include homestead, personal property, and retirement accounts. If you’re considering bankruptcy this year, it’s time to see what stays off-limits to creditors.

After the holidays, the bills come due, literally. For many Texans, January through March is when financial pressure reaches a tipping point and becomes today’s decision. Before anyone files, though, there’s one question that comes up in nearly every consultation.

“What will I lose?” And the good news is, for most people, the answer is often “not much.” The adjusted exemption laws last year are more generous than you might expect. A bankruptcy attorney can unpack how the numbers changed and what they mean for your fresh start in 2026.

Why Bankruptcy Exemptions Matter More In Early 2026

When you file for bankruptcy, exemptions are what protect your property from being sold off by the trustee. They decide what you can keep while your eligible debts are being wiped out in court.

Many people filing in early 2026 are just coming off holiday spending spikes, seasonal layoffs, or juggling end-of-year medical bills. That mix often pushes folks to the breaking point, but it can also mean they now have assets to protect.

More Texans Are Filing With Assets To Protect

This is the season when people receive tax refunds, bonuses, or gift money. Some also get a temporary bump in their savings before things dip again. Those funds can feel risky to bring into a bankruptcy case.

The good news is that thanks to the exemption increases last year, more of those items may now be fully protected. A bankruptcy lawyer can help you time your filing under the new rules to get the most exemptions.

Federal Adjustments Hit Just In Time

The federal exemption system updates every three years to account for inflation, as required under 11 U.S.C. § 104. The most recent adjustment hit on April 1, 2025, just months ago.

If you’re filing in 2026, you’re working with higher numbers across categories like home equity, personal property, and wildcard exemptions. These new figures give filers more breathing room.

Exemptions Can Shape Your Bankruptcy Chapter

Sometimes, a person qualifies for Chapter 7 on paper but owns too much property to protect under that chapter. That’s where the new limits come into play; they can tip the scales toward a faster, cleaner Chapter 7.

When exemptions fall short, clients may have to consider a Chapter 13 repayment plan instead. The updated numbers reduce the odds of being pushed into that corner.

It’s Not Just About Homes & Cars

You’re not only protecting big-ticket items. Furniture, electronics, and everyday household goods are often safe. Retirement accounts, too, stay off-limits to creditors in nearly every case, regardless of value.

And yes, even those spring tax refunds or child tax credits can be protected more fully now. That’s a big win for anyone filing early in the year. Searching for a “bankruptcy lawyer near me” enhances your chances since they know the local landscape and exemptions.

If you’re considering bankruptcy in 2026, the updated exemption amounts could make a real difference in what you can keep. Knowing where you stand is the first step toward taking back control.

What The 2026 Federal Bankruptcy Exemptions Really Cover

If you’re using federal exemptions in a 2026 bankruptcy case, you’re in luck. On April 1, 2025, inflation adjustment gave a healthy bump across the board.

These figures apply in states that allow federal exemptions. Texas filers usually rely on state exemptions, but it’s still helpful to compare if you’re considering the federal option.

Below is a breakdown of the most commonly used federal exemptions in 2026, pulled directly from 11 U.S.C. § 522 and adjusted under 11 U.S.C. § 104:

On April 1, 2025, Official Forms, Schedule C, were updated to match the new dollar amounts. For married couples filing jointly, these numbers can be doubled if both spouses have an ownership interest in the asset.

Remember, choosing between state and federal exemptions isn’t automatic; you have to pick one system and stick with it. Some filers benefit more from Texas’s generous homestead protection, while others prefer the federal wildcard for flexibility.

Which applies to your case? That’s exactly the kind of thing we sort out during an initial consultation. Knowing which system fits your life can protect more than just property; it protects your peace of mind.

How The 2026 Texas Bankruptcy Exemptions Stack Up

For Texans filing bankruptcy in 2026, the state exemption system remains one of the most protective in the country. If you’ve lived in Texas for at least 730 days, you’re eligible to use these exemptions, and for many people, they offer a much better fit than the federal ones.

Texas lets you keep more than just the basics. These exemptions preserve your ability to live, work, and support your family after bankruptcy. That’s especially true if you own a home, a vehicle, or tools used in your trade.

Texas Homestead Exemption

Texas offers unlimited equity protection for your primary residence, as long as your property fits within the allowed acreage. It exempts 10 acres in urban areas, up to 100 acres for a single adult and 200 acres for a family in rural zones.

Unlike the federal homestead exemption, which caps the dollar value you can protect, Texas doesn’t impose a value limit. That makes a big difference if you’ve built up equity over time or own your home outright.

Vehicle Protection In Texas

You can protect one motor vehicle per licensed household member, or per a dependent who relies on someone else for transportation. It means if two adults have licenses, both vehicles can be exempt, no matter the value.

Texas doesn’t place a strict dollar limit on how much vehicle equity you can keep. Whether your car is worth $2,000 or $20,000, you may still be able to protect it fully.

Personal Property Limits

Texas allows individuals to exempt up to $50,000 in total personal property, or $100,000 for a family. It includes items like clothing, furniture, electronics, firearms, food, and household pets, valued at today’s used market prices.

Most filers discover their personal belongings fall well under this limit. Everyday items like used appliances or worn couches rarely count for much, which means you won’t need to part with them in most cases.

Retirement, Insurance, & Public Benefits

Fully protected categories in Texas include Social Security, VA benefits, workers’ compensation, and most retirement accounts such as IRAs and 401(k)s. Life insurance cash values are also exempt in many cases, depending on the policy type.

It means your long-term financial security isn’t at risk just because you’re getting rid of debt. These laws are structured to help people reset without losing everything they’ve worked for.

Texas exemptions are some of the strongest available. If you’re filing here in 2026, you’re in one of the best positions nationwide to keep your property and regain control of your finances.

Planning To File Soon? Ensure Your Property Stays Protected

If you’re gearing up to file in early 2026, you’re not alone. It’s one of the busiest seasons for new bankruptcies, and the updated exemption figures give you a clearer path forward than in years past.

At Austin Bankruptcy Lawyers, a Division of Kannon Moore Law, we walk clients through the exemption system every day. Whether you’re using the Texas or federal option, we help you understand what you can keep and how to protect it.

No two cases are alike, and that’s why a one-size-fits-all answer won’t cut it. From homes and vehicles to tax refunds and tools of the trade, the right plan depends on the full picture of your finances.

We don’t just help you file; we help you plan for what happens after. That includes keeping your protected assets safe and giving you room to rebuild your credit with confidence.

If you’re ready to stop guessing and start moving forward, consult with our team today. Austin Bankruptcy Lawyers will help you make the most of the law’s protections while you take the next step toward financial relief.