When Tennessee residents are experiencing financial difficulties, they may worry about losing their personal property. When people file for bankruptcy, especially, they may know that some property can be sold to help pay back debts. Or, in the case of secured property, people may realize that their property can be subject to repossession or foreclosure. In particular, people may wonder if their home is safe from sale during a bankruptcy.
Under Tennessee law, people are provided with many bankruptcy exemptions. These exemptions allow people to keep some of their personal property despite filing for bankruptcy. During a Chapter 7 bankruptcy, non-exempt property is sold to pay back debtors. However, bankruptcy exemptions ensure that people are not left without means to fulfill their basic needs following bankruptcy proceedings.
Under section 26-2-301 of the Tennessee Code, people have an exemption in their homestead. A homestead is the person’s principal place of residence. Under the code, a person is allowed to keep up to $5,000 in value in their homestead. This means if a person has $5,000 or less in equity in the person’s home, then the home will not enter the bankruptcy estate and used to help pay creditors. Furthermore, under section 26-2-301, if a married couple files for bankruptcy together, they are allowed to keep $7,500 in value from their home.
The rules change slightly if people are 62-years-old and older. Under section 26-2-301(e), if a person is 62, then the person can keep up to $12,500 in equity in their homestead. If a married couple files for bankruptcy and they are both at least 62-years-old then the couple can keep up to $25,000 in equity. However, if only one spouse is 62-years-old, then the couple can keep only $20,000 in equity.
People should seek specific legal advice — which this post cannot provide — when considering filing for bankruptcy. This way people can make the most of their homestead exemption and other available bankruptcy exemptions.