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How does the homestead exemption work in bankruptcy?

Although 844,495 bankruptcy cases were filed in 2015, financial experts see that number as a sign of hope that the economy is showing signs of recovery. It's lower than the 936,795 cases filed in 2014, and much lower than 2005, when a record number of more than 2 million cases were filed.

Tragically, 46 percent of those 2005 bankruptcies were related to medical expenses, in the form of injuries, illnesses and conditions not covered by insurance. Since 2005, many other factors have been added to the list of valid reasons that so many people are in need of debt relief. Job loss, reduced income, stagnating wages, inflation, rising housing and energy costs and unexpected expenses are just a few.

Exemption protections for your home

A home is usually the single most valuable asset people own. It often represents years of investment, both emotional and financial. That's why most states have a homestead exemption, which is designed to protect that investment from creditors in the event that filing bankruptcy becomes necessary. Homestead exemptions may prevent the forced sale of a home considered a primary residence to satisfy debts. If the home must be sold, they can also ensure that the homeowner retains a portion of the proceeds.

Unfortunately, the amounts allowed for homestead exemptions in most states are rarely adjusted for inflation. Tennessee laws provide homestead exemption protection of up to $5000 for single homeowners and $7,500 for married couples. While couples cannot double the original $5000 to $10,000, couples with minor dependent children in the household can double their $25,000 exemption to $50,000, since each spouse is eligible for the benefit.

Unmarried individuals aged 62 or older can claim up to $12,500 on their principal place of residence. A married couple with one person aged 62 or older can claim up to $20,000 on a home, and if both are aged 62 or older, the amount is increased to $25,000. To help ease the pain of loss during difficult financial times, burial plots and space in mausoleums are also protected.

Bankruptcy can protect your financial future

In Tennessee, the whole property may be exempt from debts owed by just one spouse if the property is held as tenancy by the entirety. If you are one of the many experiencing financial distress, an experienced attorney can help you take full advantage of the existing legal protections that have kept millions of Americans from losing their homes.

Bankruptcy laws, and the homestead exemption, were designed to prevent temporary financial setbacks from having permanent consequences. Future President William McKinley filed in 1893, visionary Walt Disney in 1923 and superstar singer Cyndi Lauper in 1981. The protections of bankruptcy enabled them, and many others, to achieve future financial success.

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
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