What possessions can people keep when filing bankruptcy in Tennessee?
One of the biggest fears that many people have about filing bankruptcy is that they will lose all of the possessions which they have worked so hard to obtain. However, bankruptcy law allows people to exempt some property from the bankruptcy estate, the total amount of a person’s assets available to repay creditors, so that people have enough remaining after bankruptcy to meet their basic needs. In some states, people filing bankruptcy may choose to use the exemptions under the state’s bankruptcy laws or the federal bankruptcy exemptions. However, Tennessee requires its residents to use Tennessee bankruptcy exemptions, so it is important for those considering bankruptcy in Tennessee to understand the state’s bankruptcy exemptions.
Tennessee law allows people to protect equity in their homes when filing bankruptcy. For many people, their homes are collateral securing their mortgage loans. The bankruptcy exemption does not prevent the mortgage lender from foreclosing on the home if the borrower has not been making payments on the mortgage. However, it does give people some rights against those who hold judgment liens against the homeowner or second or third mortgage lien holders.
The law allows people under the age of 62 years old to exempt $5,000 of equity in their primary residences from the bankruptcy estate. Those with one or more minor children living with them as dependents may exempt up to $25,000. Those 62 years of age and older may exempt $12,500 of equity in their homes.
Married couples may take a $7,500 homestead exemption. If a married couple has at least one or more minor children living with them as dependents, they may claim up to $50,000 as a homestead exemption. If one spouse in 62 years old or older and the other spouse is younger than 62 years old, the couple may exempt up to $20,000. If both spouses are 62 years old or older, they may exempt up to $25,000. If a marital home is held as a tenancy in the entirety, the entire value of the home is exempt from the debts of only one spouse.
Personal property exemption
Tennessee law also allows people to exempt $10,000 of personal property from the bankruptcy estate. People may include items under this exemption such as automobiles, non-retirement bank accounts, bibles, school books, family portraits or pictures, health aids, clothing, storage containers, lost future wages for the filer or a person upon whom the filer depended, and burial plots.
People may also exempt up to $7,500 of recovery for personal injury and $10,000 of recovery for wrongful death.
While Tennessee residents may not use federal bankruptcy exemptions, certain so-called “non-bankruptcy exemptions” set up by federal law are available to Tennessee residents. Benefits such as Social Security, civil service and veteran’s are automatically excluded from the bankruptcy estate. Federal law protects people’s pensions and retirement savings accounts such as 401k or IRA accounts from the bankruptcy estate, as well. Federal law also puts a cap on the amount of a person’s wage that creditors may garnish.
Bankruptcy law is complex, and a number of different factors can influence how the laws will apply to a person’s circumstances. If you are considering filing bankruptcy, seek the assistance of a skilled bankruptcy lawyers near me who can help you decide the best course of action for your situation.