For many people, the biggest deterrent from seeking Chapter 7 bankruptcy relief is the potential to lose all of their assets. Often, the foremost concern is whether you can retain your primary residence during a Chapter 7 bankruptcy. Unlike Chapter 13, which includes a court-structured repayment plan for your accumulated debts, Chapter 7 involves only discharge of debts, not their repayment. That means that the courts may order you to liquidate some of your assets in order to pay back what you can prior to discharging your debt. In some cases, part of your home equity could be at risk.
How is your home protected during Chapter 7 bankruptcy?
Bankruptcy law includes special protections called exemptions. These are financial limits on specific kinds of possessions protected by law from liquidation during bankruptcy. Exemptions allows people filing bankruptcy to maintain a basic standard of living, including some of their home equity, possibly a vehicle, and certain other assets which the courts could consider valuable and a potential source for repayment. An experienced bankruptcy attorney can review what possessions you have and determine what you can reasonably expect to have exempted from the bankruptcy liquidation process.
What is the homestead exemption in Tennessee?
Every state has different statutes for homestead exemption, which is the amount of equity you can have in your home during bankruptcy. Tennessee has a slightly more complex exemption than the federal government, which allows for the protection of up to $22,975 in homestead equity. In Tennessee, the amount of equity you may exempt from your Chapter 7 proceedings varies based on your marital status, age and whether or not you have children. For single people, the limit is $5,000 or $7,500 for joint owners. An individual who is 62 years or older can have up to $12,500 in protected equity.
A married couple with one partner over the age of 62 or older can exempt $20,000, while a couple where both people are 62 or older can exempt $25,000 worth of home equity. $25,000 is the exemption amount for couples with minor children. In rare cases of marriages with joint custody, that exemption could double. The state also allows for up to $10,000 as a wild card exemption, which applies to any asset.
An attorney is your best defense during bankruptcy
Bankruptcy is complex, but it can be very beneficial to those with credit card debt or medical debt, as well as other forms of debt. By going over your situation, your debts and your assets with an experienced Tennessee bankruptcy attorney, you can determine what assets can be protected if you decide to file for Chapter 7 bankruptcy.