The Things You Get to Keep in Bankruptcy

military loan forgiveness disability

When I am interviewing a client one question that is always asked is “What can I keep?” There is this fear in bankruptcy that you lose everything and that is simply not the case.

Everyone who files bankruptcy can keep their property so long as the value of the property falls within the limits of the Tennessee State Exemptions. This means that certain property is excluded from attachment by the creditors and the Bankruptcy Trustee.

The Exemption limitations are very specifically spelled out in the law and as a bankruptcy attorney, I want to make sure that you get to keep all the things you want. For an example, if you want to keep your car, and your car is paid off, then we really have to look at the fair market value of the car. If, however, the vehicle is not paid off, and the value is less than what is owed, you can keep the vehicle so long as you make the payments. If there is actual equity in the vehicle, then a detailed analysis has to be done, to include, establishing a dependable fair market value of the vehicle you wish to retain.

Homestead Exemptions

A Homestead Exemption applies to the equity you have in a parcel of real property that you live in, such as your home or your farm.

Again, there are limitations associated with the net equity you can claim as exempt in a parcel of real property. If the net equity of in the land exceeds the Homestead Exemption Limits, then a Chapter 7 Bankruptcy would not be a good option because the property would be at risk to be sold by the Chapter 7 Trustee. It does not mean Bankruptcy is not an option because a Chapter 13 Bankruptcy would be more appropriate in those circumstances.

There are also limitations to the amount of money that can be kept in a bank account, the amount of jewelry, and all other personal property.

How the Process Works

During the bankruptcy process, Attorney D.J. Rausa will review all assets as well as all liabilities to ensure that the client keeps all wanted property and that all the property falls within the limitation of the Exemptions.

Presently, the Exemption Limits on all personal and real property in the State of Tennessee are set low. Meaning that there is not a lot of protection. For an example, the limitation on a home that is owned by an unmarried person, under the age of 62 is only $5,000.00. In today’s real estate market, that value is typically exceeded. A chapter 13 bankruptcy would be the only viable option.

Changes in the Federal Bankruptcy Law

The Exemption Limits are in the process of being reviewed by both the State House and the State Senate. Two bills were introduced last year, SB 0399 and House Bill 0236. Both have been sent to the Judiciary Committee and are scheduled to be heard the first quarter of 2020.

We will keep you updated on any developments.

Attorney D.J. Rausa