When people in Tennessee get to the point where they are considering filing for bankruptcy, their first thought may be to file for Chapter 7 “liquidation” bankruptcy. In a Chapter 7 bankruptcy, a debtor’s assets are sold, and the proceeds are used to pay back their creditors. However, sometimes a person’s income is too high to qualify for Chapter 7 bankruptcy. When that happens, Chapter 13 bankruptcy may be an option. When filing for Chapter 13, the debtor’s assets will be reorganized, and a repayment plan will be developed to pay the debtor’s liabilities over a period of three to five years.
However, just as in Chapter 7, bankruptcy exemptions can be an important part of a Chapter 13 filing. The Chapter 13 repayment plan is based on the income and assets the debtor has. So, if a person’s total assets equal “X,” then “X” is the minimum amount that must be repaid. However, certain assets can be exempt from this total.
Each state, including Tennessee, defines what assets are exempt from a Chapter 13 bankruptcy filing, as does federal law. In addition, these laws may also cap the value of a specific exempt asset. There are some common types of assets that may be exempted, including: a car; the debtor’s home; clothing; furniture; and jewelry. This list is not exhaustive; there are other exemptions as well.
It is important for those filing for Chapter 13 to remember some assets are exempt, just like in a Chapter 7 filing. The information found in this post is not legal advice and shouldn’t form the basis of any bankruptcy filing. Professionals are available who can explain what exemptions may apply to a person’s case and can help them file for bankruptcy.