They are entitled o payment forthwith. They have an unassailable right to be paid out of the assets of the debtors. From the scenario, many of the original settlers in Texas were debtors fleeing from creditors in other states because Texas bankruptcy laws generously protect a debtor's "homestead" from being seized by creditors. In order to discuss about these facts The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the changes in the bankruptcy code, debtors and creditors right has to consider here.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, provides few facilities that limiting state homestead exemptions to $125,000 in equity for homesteads owned for three years and four months that is less than 1,215 days. To do that they has to face two objective tests. A means test and median income test determine chapter 7 cases to protect fraud. By applying these tests court decides period of time to reduction of debts. If bankrupt income more then the test applies then he has to pay compensation for perpetrated fraud.

Debtors can protect their asset by investing them in a housestead. Debtors get opportunity to hide from creditors. However, may be congress considering policy grounds to introduce this law. May be the Texas homestead exemption Act tried to give protection for the wife and children. It is very common for a wife with young children to be faced with eviction in circumstance where the realization of her beneficial interest will not produce enough to buy a comparable home in the same neighborhood, or indeed elsewhere. And if she has to move elsewhere, there may be problems over schooling and so forth. Such circumstance engendering natural sympathy, may be they considering these issues before passing the law. Therefore, Texas homestead exemption Act, provides exemption taxes, several Code provide insurance facilities, current wages.

In addition, when a settler began bankrupt, family members may claim for beneficial interest in the homestead under a resulting or constructive trust. If wife has made a direct contribution to the purchase price, three possibilities exist. The money could have been intended as a gift, loan, and beneficial interest in the homestead to bankrupt. May be wife has indirect contributions to purchase of the homestead. For a constructive trust to arise three conditions must be satisfied. However, court follow the new rule but there has few loopholes.

The law of mortgages has particularly concerned itself with the need to protect the mortgagor from harsh and unconscionable transaction. Equity has always stressed the security aspect of the transaction and has developed rules to protect the mortgagor equity of redemption. May be court considering these issues that in equity mortgagor’s has right to redemption on date, if it not possible for him proper notice must serve.

Some of those around the table, advocate the Texas homestead exemption, and argue that provide a debtor to make a fresh start. To impose these Credit Counseling Agencies resolve the financial problem of debtors to avoid bankruptcy. Theoretically, it can be said that it is really a fresh start but practically here is a great chance to commit fraud to invest for homestead and file for bankrupt. Creditors may suffer several problems to bind by these acts. To avoid these kinds of problem it should need to be amended. In case of spouse, it should in exceptional cases.