In part one of this series, we saw that collecting a judgment from an individual is difficult because Texas protects up $50,000.00 of personal property items for single individuals and $100,000.00 in personal property items for families. This is one of many debtor protections under Texas law.
Another protection is Texas’s “strong pro-homestead tradition.” Norris v. Thomas, 215 S.W.3d 851, 854 (Tex. 2007). In fact, according to the Texas Supreme Court, this tradition “pre-dates statehood, and the Republic of Texas was determined to protect homesteads from creditors.” Id. Texas’s homestead protection is found in Article 16, section 51 of its Constitution:
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.
This homestead protection (with a few exceptions) is also found in section 41.001 of the Texas Property Code.
To qualify as a homestead, a debtor must show that he actually uses and occupies the property like a residence. Sonnier v. Chisholm-Ryder Co., 909 S.W.2d 475, 479-81 (Tex. 1995). A debtor can prove his homestead simply by showing where he lives, for instance where he spends the majority of his non-working hours or where he keeps his clothes. Caulley v. Caulley, 806 S.W.2d 795, 797 (Tex. 1991).
If a debtor sells his homestead, the proceeds of the sale are protected from seizure for six months after the sale is completed. TEX. PROP. CODE § 41.001(c). If those proceeds are used to purchase a new homestead or other exempted asset, that new asset receives the same protection. London v. London, 342 S.W.3d 768, 772 (Tex. App.—Houston [14th Dist.] 2011).
The bottom line is that when looking to collect a judgment from an individual debtor, the debtor can protect from seizure 200 acres of country land or 10 acres of city land—along with the improvements on the land. Thus, if your individual debtor’s only assets are a house and basic personal property items, collecting a judgment from that debtor will be a difficult task.