for rent sign on building

Filing for bankruptcy is not a decision that many make lightly due to the impact it can have on your life. This process can heavily affect your credit for up to a decade and could lead to the liquidation of assets. However, the financial relief is something that outweighs these cons for many. One such asset that many filers have concerns about is their rental properties. If you are considering filing for bankruptcy and want to know what will happen to any homes, apartments, or vacation properties you rent out is critical. The following blog explores what you should know about these matters and how a Memphis, TN consumer bankruptcy attorney can help you through this process.

Can I Keep My Rental Properties if I File for Bankruptcy?

When you file for bankruptcy and own rental properties, it’s important to understand that the kind of bankruptcy you file will impact whether or not you can retain these assets.

Generally, when you file Chapter 7 bankruptcy, this involves the liquidation of your assets. Essentially, this means the bankruptcy trustee assigned to your case can take and sell your assets to pay off creditors. However, many states, including Tennessee, have a Homestead Exemption Act. This allows you to protect your home from being liquidated during the bankruptcy process. However, this cannot be applied to rental properties.

Depending on the amount of equity you have in the rental property, you may be able to apply a wildcard exemption. This essentially lets you choose any asset to protect, so long as it does not exceed the limit. In Tennessee, this limit is set at $10,000.

On the other hand, if you file for Chapter 13 bankruptcy, you likely will not lose any of your assets, as this does not require liquidation. Instead, this process puts filers on a repayment plan, generally lasting three to five years. However, you’ll still need to keep these properties in mind when filing, as you’ll need to determine the income you earn from renting these units out and whether or not you need to catch up on past mortgage payments.

If I Want to File, Can an Attorney Help?

Filing for bankruptcy can be an overwhelming process, as there are many considerations you’ll need to make. As such, it’s imperative to connect with an experienced attorney who can help you determine the best course of action for your specific needs. For example, they may be able to help you determine whether or not you can qualify for the wildcard exemption, depending on the amount of equity you have

At the Arnold Law Firm, we understand that financial uncertainty can be anxiety-inducing. If you are drowning in debt and have decided filing bankruptcy is your best course of action, we are here to help. Connect with our compassionate and competent team today to learn how we can fight for you during these challenging matters.