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What are the Tennessee bankruptcy exemptions?

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In a Nutshell

When Congress enacted the bankruptcy laws, it gave states the option to choose how they wanted filers to exempt their property. States were given the option to choose between allowing the federal exemptions set forth in the Bankruptcy Code and state exemptions. Some states allow filers to choose which exemption they want to use. Tennessee is not one of these states. If you are looking to file bankruptcy and exempt your property in Tennessee, you will be limited to Tennessee’s exemptions only. Tennessee law does not allow you to use the federal exemptions to protect property of the bankruptcy estate. One exception to this rule is that you can use the federal nonbankruptcy exemptions to protect certain retirement accounts and disability benefits.

Written by Attorney Karra Kingston.  
Updated July 28, 2020


What Are Tennessee Bankruptcy Exemptions and Why Are They Important in Chapter 7 Bankruptcy?

If you are struggling to pay your credit card debt each month, then you may be looking into filing a Tennessee bankruptcy. Some people are hesitant to file for bankruptcy because they are concerned that the bankruptcy court will take their property when they file. This is not how the bankruptcy process works. When you file for bankruptcy, you get to keep some of your property. Tennessee bankruptcy exemptions allow you to protect certain property up to a certain value. The bankruptcy court understands that you need some property to be able to start over. The bankruptcy court agrees that it would be impossible to get a “fresh start” if all of your belongings were taken away from you. This would be counterintuitive to the purpose of bankruptcy. Congress enacted bankruptcy laws to help people a fresh start and exempt property is property that is not at risk of being sold for the benefit of your creditors as part of your bankruptcy case. 

Does Tennessee Allow The Use Of Federal Bankruptcy Exemptions?

When Congress enacted the bankruptcy laws, it gave states the option to choose how they wanted filers to exempt their property. States were given the option to choose between allowing the federal exemptions set forth in the Bankruptcy Code and state exemptions. Some states allow filers to choose which exemption they want to use. Tennessee is not one of these states. If you are looking to file bankruptcy and exempt your property in Tennessee, you will be limited to Tennessee’s exemptions only. Tennessee law does not allow you to use the federal exemptions to protect property of the bankruptcy estate. One exception to this rule is that you can use the federal nonbankruptcy exemptions to protect certain retirement accounts and disability benefits.

Congress found that people were abusing the system and moving to States with more favorable exemptions to file their bankruptcy and then moving right back to their home state. To stop people from doing this, Congress implemented a limitation on how long one must be a resident before they can benefit from the exemptions set forth in the state law. To use the Tennessee bankruptcy exemptions, you must be a Tennessee resident for at least 730 days (two years) when your bankruptcy case is filed. 

To claim an exemption on your bankruptcy forms you will need to find the exemption that matches the property you want to keep. Most of the exemptions can be found in the Tennessee Code. As a rule of thumb, when married couples file jointly, each spouse is allowed to claim the full amount of exemption as long as each spouse has an ownership interest in the property. This means you can double the exemptions if you are filing jointly. Below, we will take a look at the property you can exempt when you file a Tennessee bankruptcy. 

Tennessee Bankruptcy Exemptions

Real Property Exemptions: Tennessee Homestead Exemptions

The Tennessee homestead exemption allows you to keep the home you are living in as long as there is not too much value in it. Using a homestead exemption allows you to keep your real estate so that the bankruptcy trustee can’t sell it to pay off your debts. 

  • The Homestead exemption in Tennessee is $5,000 for someone filing single and $7,500 for married couples who are joint owners. If the single filer or married filers are over age 62 those amounts that can be exempted increase to $12,500 and $25,000. 

  • Tennessee allows a spouse or child of a deceased owner to claim the exemption. This exemption can be used on a life estate or a two to 15-year lease. 

  • Also, if you and your spouse own the property as “tenants by the entirety,” then there is no limit on the amount of equity that can be protected. 

Personal Property Exemptions: 

Consumers filing bankruptcy can keep their personal property under the Tennessee bankruptcy exemptions. Below is a list of some of the things you can keep when you apply exemptions: 

Wildcard Exemption: 

The wildcard exemption can be used to exempt any type of personal property. You can add this to any property that does not have an exemption or does not have enough exemption to cover what you want to protect. 

  • You can exempt up to $10,000 in any personal property using the wildcard exemptions. 

Clothing and storage containers; schoolbooks, pictures, portraits, and a bible.

  • There is no limit on the amount you can exempt

Health savings accounts.

  • There is no limit on the amount you can exempt. 

Health aids; lost earnings payments for yourself or a person you depended on. 

  • There is no limit in the amount you can exempt. 

Personal injury recoveries

This is subject to a total up to $15,000 for the following:

  • You can exempt up to $7,500 for personal injury 

  • If it is a wrongful death action you can exempt up to $10,000.

  • A crime victim’s reparation award of up to $5,000.

Burial plot:

  • You can exempt up to one acre for a burial plot.

Motor Vehicle Exemption:

  • There is no specific exemption for motor vehicles. However, you can use the wildcard exemption to protect equity up to $1,325 and an additional $12,575 (of any unused homestead exemption) in your car. 

Tools of Trade: 26-2-111 

  • You can exempt tools, books, and implements of trade for your profession worth up to $1,900.

Other Tennessee Exemptions:

Wages- § 26-2-106 & 26-2-107 

  • You can exempt whichever is greater: 30 times the federal minimum hourly wage or minimum of 75% of disposable weekly income, plus $2.50 per week per child. If you are a low-income filer the judge may approve more. However, this is up to the judge’s discretion. 

Retirement Accounts - 11 U.S.C § 522(b)

Retirement Accounts can be exempt up to their full value. Below are the types of retirement accounts that fall under such:

  • Tax-exempt retirement accounts:

  • 401(k)s, 403(b)s, profit-sharing, and money purchase plans, SEP and SIMPLE IRAs, IRAS, Roth IRAs, ERISA-IRAs, and qualified benefits 

  • Nonprofit corporations' employees; public employees

  • State and local government employee- 26-2-105

  • Teachers- 45-9-090

Money Benefits: 

Public Benefits:

The following can be exempt up to the full monetary value:

  • Workers' compensation.

  • Relocation assistance payments

  • Unemployment compensation, Veterans' benefits, social security, crime victims' compensation, and local public assistance.

  • Old age assistance.

  • Aid to the blind.

  • Aid to the disabled.

Life Insurance Proceeds: 

There is an unlimited amount of exemption for the following:

  • Disability, accident or health benefits, for a resident and citizen of Tennessee- 26-2-110 

  • Disability or illness benefits- 26-2-111 

  • Life insurance or annuity -56-7-203 

  • Fraternal benefit society benefits -56-25-1403 

Alimony and Child Support: 44-13-100 

  • Alimony and child support needed for support is fully exempt at the maximum 

Filing Chapter 7 Bankruptcy

Making sure that your exemptions work with your property is essential to ensuring your bankruptcy case goes smoothly. Speaking with a Tennessee bankruptcy attorney is a good way to get more information about the Tennessee bankruptcy exemptions. Most attorneys will allow you to go to their law firm for a free consultation to discuss your financial situation. They will also help you determine if a Chapter 7 bankruptcy or a Chapter 13 bankruptcy is the most appropriate for your current financial situation. If you own a lot of nonexempt assets, you may need to file a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy. If you file a Chapter 7 bankruptcy and don’t have enough exemptions to cover the value of the property you own, the bankruptcy trustee will take your non-exempt assets and sell them to pay your creditors.

Upsolve is a non-profit organization that helps people file for bankruptcy every day. Our website has free bankruptcy tools you can use to help you file for bankruptcy. If you don’t have the financial means to hire a bankruptcy attorney, our tools can walk you through the steps so you can do it all on your own! 



Written By:

Attorney Karra Kingston

LinkedIn

Ms. Kingston began her career as a bankruptcy attorney. She has appeared in front of many federal court judges and has helped numerous debtors obtain a fresh start. Ms. Kingston understands the complex federal rules for discharging debt. While working as a bankruptcy attorney, Ms... read more about Attorney Karra Kingston

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