When Congress drafted the nation’s bankruptcy code, lawmakers created a list of exemptions that allow individuals to protect certain assets when they seek debt relief. The bankruptcy code also allows state lawmakers to create their own exemptions. In some states, individuals or married couples who file Chapter 7 bankruptcies can choose to use either their state’s exemptions or the federal exemptions, but Tennessee residents do not have this option. Chapter 7 filers who have lived in Tennessee for two years or longer must use the state exemptions, which is bad news for them because the federal exemptions are far more generous.
Homes and cars
The assets that Chapter 7 filers are most concerned about protecting are usually their homes and vehicles. The Tennessee homestead exemption is $7,500 for joint filers and $5,000 for single filers. The federal homestead exemption is currently $27,900. Tennessee does not have a motor vehicle exemption, but Chapter 7 filers who wish to protect their cars can use the state’s $10,000 wildcard exemption. The federal motor vehicle exemption is $4,450, and the federal wildcard exemption is $1,475. It should be noted that the Tennessee homestead exemption is far more generous when Chapter 7 filers are over 62 years of age or take care of minor children.
The Tennessee bankruptcy exemptions allow Chapter 7 filers to keep clothing, pictures, bibles and portraits with no dollar caps, but the exemption for tools of the trade is limited to $1,900. The federal exemptions protect up to $14,875 in household goods and up to $2,800 worth of tools. Federal bankruptcy exemptions also allow Chapter 7 filers to keep more of the money they receive in personal injury lawsuits. In Tennessee, only $7,500 of personal injury awards and $10,000 of wrongful death awards are protected. The federal exemption protects personal injury awards of up to $27,900.
A fresh start
While the bankruptcy exemptions in Tennessee may not be as generous as the federal exemptions, they still provide an attractive alternative to unmanageable financial situations and daily harassment from creditors. The bankruptcy laws and exemptions were drafted to give people an escape from overwhelming debt and provide them with the chance to make a fresh start.