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When you declare bankruptcy, Tennessee law allows you to keep a roof over your head in what it calls a homestead exemption. This comes into play when you file for bankruptcy protection and a liquidation of all your assets can include property.

If you file for Chapter 7 bankruptcy protection, a trustee will sell your property to pay your bills. Your primary home, however, won’t be included. If you file for Chapter 13 bankruptcy protection, your debts are consolidated and you pay them off in monthly installments.

Home equity and your debt

Although you won’t be forced to sell your home, your home’s equity – the difference between what you owe and what your home is worth – can play a part in your bankruptcy filing. The Tennessee home exemption allows you to withhold these amounts:

  • $5,000 for single homeowners
  • $7,500 is there are joint owners such as spouses
  • $12,500 of the single owner is older than 62
  • $25,000 if both spouses are older than 62

These exemptions don’t apply if the home was obtained with fraudulent funds. Also, Tennesseeans can choose to take the federal exemption or the state exemption, but not both.

Necessities of modern living

When filing for bankruptcy protection, some personal belongings – “necessities of modern living” – can be exempt as well. These necessities can include some vehicles, necessary clothing and household furniture, appliances, jewelry, pensions, damages award from personal injury, money from public assistance and the tools of your trade or profession.

Property that is not exempt includes musical instruments unless the instruments are tools of your trade, stamp and coin collections, heirlooms, cash, bank accounts, stocks, bonds, more than one vehicle, more than one home or property.