Texas Rural Homestead Exemption

In re Pool, Chapter 7 case no. 18-11052-hcm (March 5, 2019)

Issues: Creditor filed an objection to a rural homestead exemption claimed by the Debtors.  The Debtors owned two separate (non-contiguous) rural properties.  The Debtors’ residence (“Residence”) was located on one property.  The Debtors actively operated their body shop business (“Body Shop”) on the other property.  The income generated from the Body Shop was used by the Debtors to support their family and Residence.  The issues addressed by the Court included whether a rural homestead under Texas law can include separate (non-contiguous) property where a debtor actively operates a business to support a debtor’s family.

Holdings: The Court analyzed Texas rural homestead laws, including Texas Property Code § 42.001(b), Texas Constitution art. XVI § 51, Fifth Circuit precedent, and Texas case law.  The Court held that a rural homestead under Texas law can include separate (non-contiguous) property where a debtor actively operates a business to support a debtor’s family and that has a nexus to the residence. As a result, the Court denied the creditor’s objection to the exemption, and determined that the Body Shop and the Residence owned by the Debtors were both exempt as a rural homestead.