Hide or remove "category" filter from the layered navigation

Based on stackexchange.com answer:
If you want to do it via XML you should edit catalog.xml

replace:

<block type="catalog/layer_view" name="catalog.leftnav" 
    after="currency" template="catalog/layer/view.phtml" />  

with this:

<block type="catalog/layer_view" name="catalog.leftnav" after="currency" template="catalog/layer/view.phtml">  
    <action method="unsetChild"><alias>category_filter</alias></action>
</block>

Try this code first. Here we are trying to remove this via layout xml update

File : app/design/frontend/<package>/<theme>/layout/local.xml

<layout>
    <catalog_category_layered>
        <reference name="catalog.leftnav">
            <action method="unsetChild"><alias>category_filter</alias></action>
        </reference>
    </catalog_category_layered>
</layout>

This will solve your problem.

If it didn't worked, then you need to do a block rewrite. For this you need to create a module. The block that you need to rewrite is Mage_Catalog_Block_Layer_View.

Module's activation file looks like this

File : app/etc/modules/Avoid_CategoryFromLN.xml

<config>
    <modules>
         <Avoid_CategoryFromLN>
             <active>true</active>
             <codePool>local</codePool>
         </Avoid_CategoryFromLN>
     </modules>
</config>

This is how rewrite configuration looks like

File : app\code\local\Avoid/CategoryFromLN/etc/config.xml

<config>
    <modules>
        <Avoid_CategoryFromLN>
            <version>1.0.0</version>
        </Avoid_CategoryFromLN>
    </modules>
    <global>
        <blocks>
            <catalog>
                <rewrite>
                    <layer_view>Avoid_CategoryFromLN_Block_Layer_View</layer_view>
                </rewrite>
            </catalog>
        </blocks>
    </global>
</config>

Now your rewrite block should posses this content

File : app\code\local\Avoid/CategoryFromLN/Block/Layer/View.php

<?php
class Avoid_CategoryFromLN_Block_Layer_View exteds Mage_Catalog_Block_Layer_View
{
    public function getFilters()
    {

        $filterableAttributes = $this->_getFilterableAttributes();
        foreach ($filterableAttributes as $attribute) {
            $filters[] = $this->getChild($attribute->getAttributeCode() . '_filter');
        }

        return $filters;
    }
}

Here getFilters() is the method that actually includes category filters inside layered navigation filter. We just remove that code by rewriting the core class. That's it.

Big Note: : You should keep capital letters as it is. Dont make them small letters. If you do, it will not work. Magento is strict in these things :) So revise all folder names, file names multiple times. Make sure you keep all names contents as it is

Now try again.

I will post down what it worked for me as a reference for others

adding this :

<reference name="catalog.leftnav">  
<action method="unsetChild"><alias>category_filter</alias></action>
</reference>

in the custom design tab of every categories does the trick.

Remember especially to add it in the parent category, thats what did it for me.