Will I Lose My Property If I File Bankruptcy In Tennessee?

red car towed Are you considering filing bankruptcy in Chattanooga? Maybe you’re afraid because you’ve heard that it can make you lose your home and any other property you may own. This is not true in most cases, since there are laws in place (called bankruptcy exemptions) that will allow you to keep most of your property! How do bankruptcy exemptions work? Depending on whether you file chapter 7 or chapter 13, the exemptions will vary.

During Chapter 7 bankruptcy, the bankruptcy trustee will sell your property and apply any proceeds to your outstanding debts. BUT- the trustee can only sell property that is not fully covered by a bankruptcy exemption! As a result, most people who are in a position to file for Chapter 7 will lose very little (if any) property in this process!

In Chapter 13 bankruptcy, your debt will be consolidated into a single payment plan. In this plan, you will repay your debt (in full or in part) by making monthly payments for three to five years. The monthly payments will be tied to the value of your bankruptcy estate. In Chapter 13, the value of your property that is covered by an exemption is deducted from the value of your estate, which will lower the amount of your monthly payment.
What exemptions are available in Tennessee?

Federal and state laws list out what property is exempt during bankruptcy. Some states let you choose between federal or state exemptions, Tennessee law does require that you use the state exemption, except in certain situations.

Homestead Exemption- This allows you to keep your home in most cases. Tennessee law exempts the following amounts:

  • $5,000 for single homeowners
  • $7,500 for joint-owners
  • 12,500 for single owners over 62 years of age (20,000 if married to a spouse under 62)
  • $25,000 if both spouses are 62 years of age

These amounts apply to the equity in your home-the difference between the value of the property and what you currently owe. If the home has a mortgage and the equity is covered by the exemption amount, the home may be kept throughout the bankruptcy process. If your equity more than the exemption, the trustee may choose to sell the property in Chapter 7, but you would receive a cash payment in the amount of your exemption. You may have the option of keeping your home by catching up on the missed payments, if you decide to file for Chapter 13 instead.

If the debt is held by only one spouse and the home is held as a tenancy by the entirety, there is not a limit to the exemption amount.

Additionally, Tennessee law also has exemptions for other important types of property. Under the law, each spouse may claim an exemption in most cases, which, essentially doubles the exemption amount. Some important exemptions are:

  • Up to $10,000 of equity in any personal property (e.g. bank accounts, motor vehicles)
  • All pension and retirement benefits
  • All workers’ compensation, unemployment, Social Security, disability or veterans’ benefits
  • All clothing
  • $1,900 of equity in tools, books or items necessary to carry out a trade or business
  • All life insurance or annuity proceeds

Need help from a Chattanooga attorney?

If you’re currently drowning in debt, you should not let the threat of losing property keep you from thinking about filing bankruptcy. We can help to fully advise you on how bankruptcy would affect your personal situation and we will recommend a solution that would allow you to keep your most important property!

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