Use of the Texas Homestead Exemption to Shelter Assets in Bankruptcy May Bar Discharge
Polewski, John Patrick
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Examines United States Bankruptcy Court for the Northern District of Texas’s decision in First Texas Savings Association, Inc. v. Reed. In the instant case, Reed filed for bankruptcy and claimed a homestead exemption under article 3833 of the Texas Revised Civil Statutes. Reed then sold nonexempt property and used the proceeds towards his home in an attempt to shelter those assets from his creditors. Thought the court recognizes that bankruptcy law allows such conversion, the value of the already preexisting Texas homestead exception and Reeds stated purpose to shelter funds, led the court to “conclude that his actions were fraudulent as a matter of Texas law and, therefore, den[y] his request for discharge.” The author believes that this decision was inconsistent with Texas law and outside the purview of the federal courts.