A personal guarantee is a legal clause designed to protect the lender in a situation where the business is unable to pay back its debt.  If you as a business owner signed a personal guarantee, you may be putting you and your family’s financial future at risk.

In the unfortunate event your business fails, all of your personal “non-exempt” assets are subject to collection based on your personal guarantee.  Your “exempt” assets, however, are yours to keep.  Make them count!

Luckily, in the great State of Texas, the Texas Constitution and the Texas Property Code create a generous safe haven for debtors and their property.

Below is a summary of Texas exemption laws:

  1. Urban and Rural Homesteads.

In Texas, homesteads are generally exempt from creditors’ claims.  Families and single adults may claim homesteads, which may be either rural or urban.[1] The size of an urban homestead applies equally to families and single adults and consists of up to ten acres on one or more contiguous lots, including any improvements on the land.[2] A rural homestead for a family is limited to 200 acres and any improvements on the land while a rural homestead for a single person is limited to 100 acres and any improvements on the land.[3]

Although homesteads are generally exempt from creditors’ claims, they are subject to certain liens, including (1) a lien for purchase money (i.e., the mortgage); (2) a lien for taxes due on the property; and (3) a lien for work and materials furnished in building improvements on the property, but only if the work and labor were furnished pursuant to a written contract.[4]

The proceeds from the sale of a homestead are exempt for six months after the sale.[5]

  1. Personal Property Exemptions.

There are two different types of exemptions for personal property in Texas: (1) an “aggregate” exemption for certain kinds of personal property, limited by the combined value of the property; and (2) unlimited exemptions for other kinds of personal property.

  1. Aggregate Exemptions.

Families and single adults may exempt certain kinds of personal property that fall within the specified categories from the claims of creditors as long as the combined fair market value of the property does not exceed: (1) $100,000 for a family; or (2) $50,000 for a single adult. If the combined value of the items in the different categories exceeds the value cap, the debtor must designate which items to exempt.[6] The kinds of personal property that may be included within the aggregate exemption are:

  • home furnishings and 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;
  • clothes;
  • jewelry, as long as it does not exceed 25% of the value of the aggregate exemption;
  • two firearms;
  • athletic and sporting equipment, including bicycles;
  • a motor vehicle for each member of a family or single adult who (A) holds a driver’s license or (B) does not hold a driver’s license but relies on another person to operate the vehicle for the unlicensed person;
  • the following animals, including forage on hand for their consumption: (A) horses, mules, or donkeys, including a saddle, blanket and bridle for each one; (B) 12 head of cattle; (C) 60 head of other types of livestock; and (D) 120 fowl;
  • household pets;
  • unpaid commissions for personal services (services owed to an employee) as long as the amount does not exceed 25% of the value cap.[7]

The above exemptions are subject to a contractual landlord’s lien or other security interest in the property[8] as well as a lien for child support.[9]

  1. Unlimited Exemptions.

In addition to the kinds of personal property that may be exempted under the aggregate exemption, a debtor may also exempt, without regard to value, the following kind of property:

  • current wages for personal services (only includes wages owed to an employee), therefore there is no wage garnishment in Texas;[10]
  • professionally prescribed health aids of the debtor or a dependent of the debtor;
  • alimony, support, or separate maintenance received or to be received by the debtor for the debtor’s support or a dependent of the debtor; and
  • a religious bible or other book containing sacred writings of a religion.[11]

The above exemptions are subject to a contractual landlord’s lien or other security interest in the property[12] as well as a lien for child support.[13]

  1. Retirement Plans.

In Texas, a debtor is also entitled to an exemption for his rights in a variety of retirement plans.  The exemption includes the debtor’s right to payments under, or the right to assets held in, the following types of plans:

  • stock bonus, pension, profit-sharing plans (such as a 401(k) plan), and similar plans, including retirement plans for self-employed individuals;
  • annuities purchased with assets distributed from such plans;
  • retirement annuities or accounts described in section 403(B) of the IRS Code (known as a Tax-Sheltered Annuity)[14] or 408A of the IRS Code (known as a Roth IRA);[15]
  • individual retirement accounts or annuities (IRAs), including a simplified employee pension plan (SEP); and
  • government or church plans or contracts that qualify under the federal Employee Retirement Income Security Act of 1974.[16]

When a debtor receives distributions from these plans, the distributions are exempt from seizure for 60 days if the distributions qualify as a nontaxable rollover contribution.[17]

The above exemptions are subject to a contractual landlord’s lien or other security interest in the property[18] as well as a lien for child support.[19]

  1. College Savings Plans.

A debtor is entitled to an exemption for college savings plans authorized under the following statutes: (1) any plan established by Subchapter F of Chapter 54 of the Education Code (the Prepaid Higher Education Tuition Program); (2) any plan established by Subchapter G of Chapter 54 of the Education Code (the Higher Education Savings Plan); and (3) any qualified state tuition plan that satisfies the requirements of section 529 of the Internal Revenue Code (the Qualified Tuition Program).[20]

  1. Miscellaneous Exemptions.

As noted earlier, the most common personal property exceptions are listed above. The Texas legislature, however, has enacted a patchwork system of exemptions for moneys received from various sources.

These other exemptions fall into two broad categories: (1) retirement plans and other benefits for public employees; and (2) public or private moneys paid to people in need or for other humanitarian purposes. Most of these statutes are too complex to explain in detail, so only the title of the program and statute are listed:

  • Public Employee Benefit Programs: Municipal Employees.
  • Texas Municipal Retirement System.[21]
  • Municipal Retirement System in Municipalities of 460,000 to 500,000.[22]
  • Municipal Pension System in cities over 1,500,000.[23]
  • Public Employee Benefit Programs: County Employees.
  • Texas County and District Retirement System.[24]
  • Public Employee Benefit Programs: State Employees.
  • Employees Retirement System of Texas.[25]
  • Texas Employees Uniform Group Insurance Benefits Act.[26]
  • Public Employee Benefit Programs: Education System Employees.
  • Teacher Retirement System of Texas.[27]
  • Texas Public School Retired Employees Group Benefits.[28]
  • State University Employees Uniform Insurance Benefits Act.[29]
  • Public Employee Benefit Programs: Judicial System Employees.
  • Judicial Retirement System of Texas Plan One.[30]
  • Judicial Retirement System of Texas Plan Two.[31]
  • Public Employee Benefit Programs: Police Officers and Fire Fighters.
  • Police Officers’ Pension System in Cities of 50,000 to 400,000 Populations.[32]
  • Police Officers Pension System in Certain Municipalities.[33]
  • Policemen’s Relief and Retirement Fund.[34]
  • Firefighters Relief and Retirement Fund in Cities of 450,000 to 500,000.[35]
  • Firefighters’ Relief and Retirement fund in Municipalities of at least 1,600,000 Population.[36]
  • Texas Local Fire Fighters Retirement Act.[37]
  • Pension System for Police Officers and Firefighters in Certain Cities.[38]
  • Police and Firefighter Retirement System in Municipalities of 750,000 to 1,000,000.[39]
  • Retirement Health Trust for Firefighters and Police Officers.[40]
  • Humanitarian Exemptions.
  • Financial Assistance to Survivors of Law Enforcement Officers and Firefighters.[41]
  • Financial Assistance and Service Programs (Aid to Families with Dependent Children).[42]
  • Medical Assistance Program.[43]
  • Crime Victims Compensation Act.[44]
  • Workers’ compensation Benefits.[45]
  • Unemployment Benefits.[46]
  • Benefits Provided by Fraternal Benefit Societies.[47]
  • Church Benefit Plans.[48]
  • Exemptions for Certain Insurance and Annuity Benefits.[49]


[1] Tex. Prop. Code § 41.002(a).

[2] Id.

[3] Tex. Prop. Code § 41.002(b).

[4] Id.

[5] Tex. Prop. Code § 41.001(c).

[6] Tex. Prop. Code § 42.003.

[7] Tex. Prop. Code § 42.002(a).

[8] Tex. Prop. Code § 42.001.

[9] Tex. Prop. Code § 42.005.

[10] Article 1, Section 28 of the Texas Constitution prohibits garnishment of wages, which protects the income of a person who receives a salary or wages.

[11] Tex. Prop. Code § 42.001(b).

[12] Tex. Prop. Code § 42.001.

[13] Tex. Prop. Code § 42.005.

[14] A 403(b) plan is a retirement plan, contributions to which are eligible for tax-deferred treatment, under which a public school or nonprofit organization purchases annuity contracts or contributed to custodial accounts for its employees.

[15] A Roth IRA is a tax-advantage retirement savings account that allows you to withdraw your savings tax-free.  Roth IRAs, however, are funded with after-tax dollars.  You can’t contribute to a Roth IRA if you make too much money.  In 2020, the limit for singles is $139,000.00.  For married couples, the limit is $206,000.00.  Further, the amount you can contribute changes periodically.  In 2020, the contribution limit is $6,000.00 a year unless you are over 50—in which case, you can deposit up to $7,000.00 annually.

[16] Tex. Prop. Code § 42.0021(a).

[17] Tex. Prop. Code § 42.0021(c).

[18] Tex. Prop. Code § 42.001.

[19] Tex. Prop. Code § 42.005.

[20] Tex. Prop. Code § 42.0022.

[21] Tex. Gov’t Code § 851.006.

[22] Tex. Rev. Civ. Stat. art. 6243n, § 11(d).

[23] Tex. Rev. Civ. Stat. art. 6243h, § 220.

[24] Tex. Gov’t Code § 841.006.

[25] Tex. Gov’t Code art. 3.50-2, § 10.

[26] Tex. Ins. Code § 1550.011.

[27] Tex. Gov’t Code § 821.005.

[28] Tex. Ins. Code § 1575.006.

[29] Tex. Ins. Code § 1601.008.

[30] Tex. Gov’t Code § 831.004.

[31] Tex. Gov’t Code § 836.004.

[32] Tex. Rev. Civ. Stat. art. 6243j, § 20.

[33] Tex. Rev. Civ. Stat. art. 6243g-4, § 28.

[34] Tex. Rev. Civ. Stat. art. 6243d-1, § 17.

[35] Tex. Rev. Civ. Stat. art. 6243e.1, § 1.04.

[36] Tex. Rev. Civ. Stat. art. 6243e.2(1), § 15.

[37] Tex. Rev. Civ. Stat. art. 6243e, § 5.

[38] Tex. Rev. Civ. Stat. art. 6243a-1, § 8.03.

[39] Tex. Rev. Civ. Stat. art. 6243o, § 1.05.

[40] Tex. Rev. Civ. Stat. art. 6243q, § 1.05.

[41] Tex. Gov’t Code § 615.005.

[42] Tex. Hum. Res. Code § 31.040.

[43] Tex. Hum. Res. Code § 32.036.

[44] Tex. Code Crim. Proc. art. 56.49.

[45] Tex. Labor Code § 408.201.

[46] Tex. Labor Code § 207.075.

[47] Tex. Ins. Code § 885.316.

[48] Tex. Rev. Civ. Stat. art. 1407a, § 6.

[49] Tex. Ins. Code § 1108.51.

Brandon Tittle leads the firm’s Bankruptcy/Financial Restructuring Practice, with a focus on corporate reorganization, restructuring, acquisitions and litigation. He has a wealth of experience representing entities in their Chapter 7 and 11 cases and out-of-court restructurings and creditors’ committees. His practice also includes extensive general bankruptcy litigation.