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What property is exempt under Chapter 7 bankruptcy?

Tennessee residents struggling to tread water while a rip tide of debt tries to drown them can use a life preserver. One potential lifesaver is filing for bankruptcy. Whether doing so makes sense will depend on a variety of factors, including what type of property a Tennessee resident has and how it will be treated during the bankruptcy process, particularly Chapter 7 bankruptcy.

Chapter 7 bankruptcy is one of several forms of debt relief available under bankruptcy law. Chapter 7 is known as liquidation bankruptcy because a person who goes through a Chapter 7 bankruptcy will normally have to sell off, or "liquidate," their assets.

But, bankruptcy law does not require a person to sell off every last piece of their property. To the contrary. Such a requirement would fly in the face of one of the key reasons that bankruptcy exists: to help people get back on their feet quickly.

Because of that principle, certain property is exempt from liquidation. Property in this category usually survives the bankruptcy. These include necessary clothing, household appliances, motor vehicles up to a certain value and tools of the person's trade, again up to a certain value. It also includes pensions, earned but unpaid wages to a certain extent and public benefits like welfare, Social Security and unemployment benefits.

However, not everything is exempt. For example, second homes and vehicles, collectibles and family heirlooms, as well as cash, bonds, stocks, bank accounts and other investments usually are not exempt. Tennessee resident may benefit from getting more information about the potential benefits of a bankruptcy filing.

Source: FindLaw, "Exempt vs. Non-exempt Property Under Chapter 7," Accessed July 19, 2016

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Mark T. Young & Associates
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