What Are the Tennessee Bankruptcy Exemptions?

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

If you're 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. Luckily, this isn't how the bankruptcy process works. Most Chapter 7 filers get to keep all of their property.

Tennessee bankruptcy exemptions allow you to protect certain property up to a certain value. Exempt property is property that isn't at risk of being sold for the benefit of your creditors as part of your bankruptcy case. Bankruptcy law includes exemptions because there's an understanding that you need some property even when you're starting over fresh financially. 

Does Tennessee Allow Filers To Use 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 set of exemptions they want to use. Tennessee isn't one of these states.

If you are looking to file bankruptcy and exempt your property in Tennessee, you're limited to Tennessee’s exemptions. Tennessee law doesn't 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.

Also, to be able to use Tennessee's exemptions, you must've lived in the state for at least two years. Otherwise, you'll be restricted to using the federal exemptions.

To claim an exemption on your bankruptcy forms you 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're filing jointly.

Now, let's take a look at the property you can exempt when you file a Tennessee bankruptcy. 

Tennessee Bankruptcy Exemptions

Exemptions fall into three broad categories: real property, personal property, and intangible property like money benefits.

Real Property: The Tennessee Homestead Exemption

The Tennessee homestead exemption allows you to keep the home you are living in as long as you don't have too much equity 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 single filers and $7,500 for married couples who are joint owners. If the single filer or married filers are over age 62 the exemption amounts 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 2-to-15-year lease. 

• Also, if you and your spouse own the property as “tenants by the entirety,” then there's 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.

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

• Health savings accounts

• Health aids

• Lost earnings payments for yourself or a person you depended on

• Burial plot: exempt up to one acre for a burial plot

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

Personal injury recoveries are subject to a total up to $15,000 for the following:

• $7,500 for personal injury 

• $10,000 for a wrongful death action

• $5,000 for a crime victim’s reparation award

There's 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. 

Wildcard Exemption

You can exempt up to $10,000 in any personal property using the wildcard exemption. You can add this to any property that isn't otherwise covered by an exemption or doesn't have enough to cover what you want to protect. 

Other Tennessee Exemptions

Wages 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're a low-income filer the judge may approve more. But this is up to the judge’s discretion. 

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

• Teachers

Money Benefits 

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

• Workers' compensation

• Relocation assistance payments

• Unemployment compensation

• Veterans' benefits

• Social Security

• Crime victims' compensation

• Local public assistance

• Old age assistance

• Aid to the blind

• Aid to the disabled

• Alimony and child support needed for support is fully exempt

Life insurance proceeds are exempt for an unlimited amount for:

• Disability, accident, or health benefits, for a resident and citizen of Tennessee 

• Disability or illness benefits

• Life insurance or annuity

• Fraternal benefit society benefits 

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'll also help you decide if a Chapter 7 bankruptcy or a Chapter 13 bankruptcy is the most appropriate for your current financial situation.

If you have a simple Chapter 7 case, you can use Upsolve's free filing tool to file your case.