8 Texas Exemptions That Protect You From a Personal Guarantee

What These Rules Do, and the Thing They Will Not Do

Start with the disappointing part, because everything else follows from it. Exemptions protect a human being. They do nothing whatever for the trucks titled to your LLC, the inventory in your warehouse, the receivables your funder has a lien on, or the operating account your business runs payroll from. If the judgment names only your company, the list below is not your defense. If the judgment names you because you signed a guaranty, the list below is close to the whole game.

The second thing to be clear about is timing. An exemption is not a force field that switches on when a creditor gets close. It is a status a court recognizes when property is claimed, which means somebody has to claim it, in writing, usually on a deadline. The last section of this page walks through the procedure Texas adopted in 2022 for exactly that, and it is the part of this subject with actual dates in it.

What makes Texas unusual is the size of the protection rather than the existence of it. A homestead with no dollar ceiling, a hundred thousand dollars of personal property outside any lien, a paycheck the constitution puts entirely out of reach, and uncapped retirement and insurance value add up to a guarantor who can survive a judgment intact. Creditors know the arithmetic, which is why guaranty files in Texas often settle for less than the same file would elsewhere.

1. The Homestead, With No Dollar Ceiling Anywhere in It

Article XVI, §50(a) of the Texas Constitution protects the homestead of a family or a single adult from forced sale for the payment of all debts except a short enumerated list, and Tex. Prop. Code §41.001(a) carries the same rule into the statutes. There is no valuation limit in either text. A guarantor with two million dollars of equity in a Dallas house is in the same position as one with fifty thousand, which is not true in California, not true in New York, and one of the reasons out-of-state funders misjudge Texas files.

The exceptions that do exist have nothing to do with a business guaranty. They are purchase money, ad valorem taxes on the property, construction work and materials contracted for in writing under §53.254, an owelty of partition, a refinance of an existing lien, a qualifying home equity extension of credit, and a qualifying reverse mortgage. A funder that took your personal guaranty on a merchant advance holds none of those, and cannot manufacture one after the fact.

Two further provisions are worth knowing. Section 41.001(c) protects the proceeds of a homestead sale from seizure for a creditor’s claim for six months after the date of sale, which is the window in which a family that sells and does not immediately reinvest becomes exposed. And §41.0021 preserves homestead status where the residence is held in a qualifying trust that gives the settlor or beneficiary the right to revoke, a general power of appointment over the property, or the right to occupy it as a principal residence at no cost.

2. Ten Acres in Town, One Hundred or Two Hundred Outside It

Section 41.002 draws the boundaries. An urban homestead consists of not more than ten acres of land, which may be in one or more contiguous lots, together with any improvements, where the property is used for the purposes of an urban home or as both an urban home and a place to exercise a calling or business. A rural homestead is not more than 200 acres in one or more parcels for a family, or not more than 100 acres for a single adult who is not otherwise entitled to a homestead.

The urban test at §41.002(c) is mechanical and worth applying to your own address. Property is urban if, at the time the designation is made, it sits within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision, and it is served by police protection, paid or volunteer fire protection, and at least three of five listed services: electric, natural gas, sewer, storm sewer and water. Fail any element and the acreage available to you multiplies by ten or twenty.

The phrase carrying the most weight for a business owner is the one permitting the urban homestead to be used as both a home and a place to exercise a calling or business. A contractor who runs the company from a shop behind the house, a caterer working out of a converted garage, an owner-operator parking rigs on the lot: those uses do not cost the homestead its character. Whether particular improvements are part of the protected homestead or separate business property is fact-specific and worth counsel’s attention before a creditor raises it.

3. One Hundred Thousand Dollars of Personal Property, Net of Liens

Tex. Prop. Code §42.001(a) exempts personal property described in §42.002 from garnishment, attachment, execution or other seizure where it is provided for a family and has an aggregate fair market value of not more than $100,000, or 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 $50,000. Those figures have stood since the 2015 amendment in H.B. 2706, effective September 1, 2015, and they are not indexed to inflation.

Read the qualifier at the end of each clause, because it is doing more work than the number. The cap is measured exclusive of the amount of any liens, security interests or other charges encumbering the property. So a $60,000 truck with a $45,000 note against it consumes $15,000 of the allowance, not $60,000. For a guarantor whose vehicles and equipment are financed, the practical room under the cap is far larger than the sticker values suggest.

Two adjustments sit alongside it. Section 42.001(d) exempts unpaid commissions for personal services up to twenty-five percent of the aggregate limit, and counts them inside the cap. And §42.001(b) lists four categories that sit entirely outside the cap and do not consume any of it: current wages for personal services, professionally prescribed health aids, alimony and support received for the debtor or a dependent, and a religious bible or other book of sacred writings seized by a creditor other than a landlord exercising a lien.

4. What Actually Fits Inside the Cap, and the Subsection That Undoes It

Section 42.002(a) lists eleven categories: home furnishings including family heirlooms; provisions for consumption; farming or ranching vehicles and implements; tools, equipment, books and apparatus, including boats and motor vehicles used in a trade or profession; wearing apparel; jewelry not exceeding twenty-five percent of the aggregate limit; two firearms; athletic and sporting equipment including bicycles; a two, three or four-wheeled motor vehicle for each family member or single adult holding a driver’s license, or who relies on another person to drive; certain animals with forage; and household pets.

The fourth category is the one guarantors underuse. Tools, equipment, books and apparatus used in a trade or profession, expressly including boats and motor vehicles used in that trade, are exempt personal property. An owner-operator who personally owns his tractor, a welder who owns his rig, a hairdresser who owns her chairs: those are trade tools, not business assets, provided the property is genuinely owned by the individual rather than by the company. Section 42.003 lets you designate which property is levied on when you own more than the exemption allows.

Then read §42.002(b), which is where a lot of this evaporates. Personal property may be encumbered by a security interest under ch. 9 of the Business and Commerce 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. Section 42.001(c) says the same thing from the other direction. If you granted your funder a blanket lien that reached personally owned equipment, the exemption does not defeat it.

5. Your Pay, Until the Moment It Stops Being Pay

Article XVI, §28 of the Texas Constitution removes current wages for personal service from garnishment entirely, allowing only court-ordered child support and spousal maintenance to reach them. Tex. Prop. Code §42.001(b)(1) puts current wages outside the aggregate cap, so protecting your income costs you none of the $100,000. Tex. Civ. Prac. & Rem. Code §63.004 requires a garnishee holding current wages to be discharged, and §31.0025 stops a court from using a turnover order to reach wages before they are paid, in any form, including paycheck, cash or property.

The word doing the work in all four provisions is “current.” The protection attaches to compensation for personal service that has not yet reached you. Once your paycheck is deposited and clears, the money is a deposit account balance, and a deposit account balance is reachable by an ordinary writ of garnishment subject to whatever exemptions you claim on the funds themselves. A guarantor who leaves six months of income sitting in a personal checking account has converted protected wages into an exposed balance.

There is a second edge that catches owners specifically. If you take distributions or draws from your own company rather than wages for personal service, whether those payments are “current wages for personal service” is a question a creditor will litigate, and the answer depends on the substance of the arrangement rather than the label in your accounting software. Owners who pay themselves irregularly are in a materially weaker position than owners on a documented payroll.

6. Retirement and Education Accounts, Without a Dollar Limit

Tex. Prop. Code §42.0021(b) exempts a person’s interest in, and right to receive payments from, a qualified savings plan, whether vested or not, from attachment, execution and seizure for the satisfaction of debts, and it does so in addition to the §42.001 allowance rather than inside it. There is no ceiling. Subsection (a) reaches employer, government and church plans, self-employed plans, simplified employee pensions, IRAs and Roth IRAs including inherited ones, health savings accounts, Coverdell accounts, Texas prepaid tuition and savings trust accounts, any state’s §529 plan, and any state’s §529A ABLE program.

The trap is the distribution. Under §42.0021(e), amounts distributed from a qualified savings plan are exempt for sixty days after the date of distribution, and continue to be exempt afterward only if the amounts qualify as a rollover contribution under the Internal Revenue Code. A guarantor who takes a hardship distribution to make a payment on the very debt being collected has moved protected money into an exposed account, and has sixty days before the protection lapses.

Three limits round it out. Subsection (d) removes excess contributions under Internal Revenue Code §4973 and the earnings on them. Subsection (f) excludes an interest in a plan that is solely an unfunded, unsecured employer promise to pay deferred compensation, which is worth checking if part of your compensation is a nonqualified arrangement. And subsection (g) permits you to grant a security interest in your plan interest to secure a loan from the plan, in which case that interest is subject to seizure to satisfy what you pledged.

7. Insurance and Annuity Value, Which Guarantors Forget They Own

A whole life policy with cash value is an asset, and business owners routinely forget it is on the balance sheet until a creditor finds it. Tex. Ins. Code §1108.051(b) makes insurance and annuity benefits, including the cash value and proceeds of a policy, inure exclusively to the benefit of the person designated in the contract and fully exempt from garnishment, attachment, execution or other seizure, from application by any legal or equitable process to pay a debt of an insured or beneficiary, and from a demand in a bankruptcy proceeding.

Section 1108.001 makes clear these exemptions are in addition to the ones in Property Code ch. 42, so insurance value does not consume the aggregate personal property allowance. Section 1108.002 treats an annuity contract issued by a life, health or accident insurance company, or under an annuity or benefit plan used by an employer or individual, as an insurance policy for regulatory purposes. Section 1108.052 keeps the exemption in place regardless of whether the power to change the beneficiary is reserved to the insured, and regardless of whether the insured or the insured’s estate is a beneficiary.

Section 1108.053 lists the three ways it fails. A premium payment made in fraud of a creditor is not exempt, subject to the applicable limitations period for recovering it. A debt of the insured or beneficiary secured by a pledge of the policy or its proceeds is not covered, which matters where a lender took an assignment of a key person policy. And a child support lien or levy under Family Code ch. 157 goes through.

8. What Your Spouse Keeps When Only You Signed

Texas is a community property state, which owners assume means a creditor gets everything either spouse owns. The Family Code says otherwise. Tex. Fam. Code §3.201(a) makes a person personally liable for the acts of a spouse only where the spouse acted as agent, or incurred a debt for necessaries, and subsection (c) states that a spouse does not act as agent for the other solely because of the marriage relationship. Subsection (b) adds that, except as the subchapter provides, community property is not subject to a liability arising from an act of a spouse.

Section 3.202 sets the actual map. A spouse’s separate property is not subject to the other spouse’s liabilities unless both are liable by other rules of law. Community property subject to a spouse’s sole management, control and disposition is not subject to the other spouse’s premarital liabilities or the other spouse’s nontortious liabilities incurred during marriage. Community property subject to a spouse’s sole or joint management is subject to that spouse’s own liabilities. And all community property is subject to the tortious liability of either spouse incurred during marriage.

Sole management property is defined at §3.102(a) as the community property the spouse would have owned if single, including personal earnings, revenue from separate property, personal injury recoveries, and the increase, mutations and revenue from all of it. So your spouse’s paycheck and the account it lands in are generally beyond a creditor holding only your guaranty. Two cautions: §3.003(a) presumes property possessed by either spouse is community, and rebutting it requires clear and convincing evidence under (b); and §3.102(b) provides that once one spouse’s sole management property is mixed with the other’s, the combined property becomes jointly managed.

Where the Exemptions Stop: Every Asset Your Company Owns

It bears repeating because it is the source of most of the disappointment in this area. Chapters 41 and 42 of the Property Code protect a homestead, a family, a single adult, a debtor. They do not protect an entity. The trucks, the equipment, the inventory, the receivables and the operating account of your LLC or corporation are ordinary non-exempt property, and a judgment against the company reaches all of it through a writ of execution or a garnishment suit.

Nor do the exemptions defeat a lien you granted. Section 42.002(b) permits personal property to be encumbered by an article 9 security interest or a lien fixed by other law and provides that the security interest may not be avoided on exemption grounds, and §42.001(c) says the section does not prevent seizure by a secured creditor with a contractual landlord’s lien or other security in the property. Most advance agreements take a blanket lien in company assets and some reach personally owned equipment. That paperwork, not the exemption statute, decides those items.

What the exemptions give you instead is a floor under your household while the company side is negotiated. That floor is high enough in Texas to change the arithmetic for the creditor, because a funder that can see it will never collect the guaranty in full is a funder with a reason to take a number today. If you want the company-side picture alongside this one, we set out the seven Texas provisions that move a restructuring on the Texas restructuring page.

Why Moving Money Into the House Backfires

The unlimited homestead makes an obvious idea occur to everyone, and we are describing it here so you understand why it is a bad one rather than as anything resembling a plan. Do not do this, and if it has already happened, tell counsel before a creditor finds it.

In bankruptcy, 11 U.S.C. §522(p)(1) caps at $214,000 the interest in a homestead a debtor may exempt if it was acquired during the 1,215-day period before the petition, and that figure took effect April 1, 2025 under the triennial adjustment published at 90 Fed. Reg. 8941, with the next adjustment due April 1, 2028. Separately, 11 U.S.C. §522(o) reduces the exempt value of a residence to the extent that value is attributable to property the debtor disposed of within ten years before filing with intent to hinder, delay or defraud a creditor and could not have exempted. A federal cap and a ten-year lookback are not a loophole.

Outside bankruptcy, Tex. Prop. Code §42.004 reaches the same conduct on the personal property side: using non-exempt property to acquire, improve or pay down exempt personal property with intent to defraud, delay or hinder an interested person makes what was acquired non-exempt, though a creditor must assert the claim within two years of the transaction and it is a defense that the transfer was made in the ordinary course of business. Texas fraudulent transfer law at Tex. Bus. & Com. Code §24.002(2)(B) excludes generally exempt property from the definition of an asset, which is precisely why the federal provisions above exist to cover the gap.

How an Exemption Actually Gets Claimed in Texas

Since 2022, Texas has had a procedure for this and a form to go with it. Tex. R. Civ. P. 679b implements Tex. Gov’t Code §22.0042 and applies whenever a post-judgment turnover order, an order appointing a receiver, a writ of garnishment, a writ of execution or another post-judgment order freezes or seizes the personal property of an individual judgment debtor. The creditor or receiver must serve you with the Notice of Protected Property Rights, the instructions, and the Protected Property Claim Form approved by the Supreme Court of Texas.

Then the clock. Service is due within three business days after the creditor or receiver learns your property was frozen or seized. Nothing may be sold and no proceeds distributed for fourteen days after that service, or seventeen where it was made by mail. If you file the claim form, or another sworn document containing the same information, the court must hold a hearing and nothing may be sold or distributed until it rules. You carry the burden of proving both the exemption and the value, and a signed claim form counts as a sworn statement sufficient to carry it if it goes unchallenged. The court must decide within ten days absent good cause and, if it finds the property exempt, must order release within three business days.

Real property has its own paperwork. Under Tex. Prop. Code §52.0012 you may record a homestead affidavit in substantially the statutory form together with a certificate of mailing, then notify the judgment creditor by registered or certified mail at the addresses the statute lists. That affidavit serves as a release of record of the judgment lien as to the homestead, and if the creditor files no contradicting affidavit within thirty days after your certificate of mailing is filed, purchasers and lenders may rely on it conclusively for ninety days beginning on the thirty-first day. That is how a Texas family actually closes a sale with an old abstract on file.

Who Should You Call? Our Top-Rated Business Debt Firms

One firm on this list works the entire lifecycle of a business debt file, from stopping the daily debits through attorney-led negotiation, UCC lien removal, and a signed release. The other two cover broader debt categories that often sit alongside the advances. Choose accordingly.