Home Equity Loans
A home equity loan is a device that enables homeowners to borrow money (take money out of) their homestead. This is normally extremely inadvisable because it is removing exempt assets from a safe haven. As long as the money remains in the homestead, it cannot be taken in Texas. This means that a creditor who obtains a judgment against a homestead cannot force the sale of the homestead or reduce its value in any way – and the owner can sell the homestead and keep all of the proceeds after the mortgage and taxes have been paid. In Texas, a creditor cannot obtain a judgment lien against a homestead.
Therefore, it is normally unwise to take money out of an exempt homestead and pay it to credit cards. This is especially true if the credit cards cannot be paid off by the loan. The debtor should make a decision early on that at one point he will stop paying creditors with exempt money.