When things go bad, they go really bad. So, when a person gets behind on some of their bills, they usually get behind on all of them. And that means an assortment of unhappy creditors, including the bank that holds the mortgage on a Tennessean’s home. Does an unhappy bank mean that a Tennessean will automatically lose their home? Can filing for bankruptcy save the house?

As is normally the case with legal questions, the answer is that it depends. Some Tennesseans will be able to keep their home on the other side of a bankruptcy. Others will not.

Several factors will determine the outcome: the type of bankruptcy, how much equity is in the house and how much the person can continue to pay toward the mortgage. Let’s take those in turn.

First, Tennesseans can file for either Chapter 7 or 13 bankruptcy. Each type of bankruptcy has important differences. One of those differences is the type of exemptions at play. These exemptions serve bankruptcy’s primary goal, to give people a fresh start, not to leave them drained and impoverished. But how those exemptions look depends on the bankruptcy type. Generally, Chapter 7 exemptions are stingier. Chapter 13 exemptions, by contrast, offer a person more help.

Second, the amount of home equity a person has is essential. This is true under both Chapter 7 and 13. The reason equity is important is because that is the only factor a bankruptcy trustee considers when evaluating a person’s house. But what may be surprising is that having negative or even minimal equity is more likely to trigger an exemption.

Finally, ability to pay is important. Specifically, many times a bankruptcy will eliminate certain debts, freeing up cash to keep up on the mortgage. And that can mean keeping the house.

Tennesseans interested in learning more may benefit from speaking with an experienced bankruptcy attorney.