Several misconceptions regarding bankruptcy exist, but one of the most common ones is the fear that you will lose everything if you file for bankruptcy. That, along with a perceived stigma, can make people continue to struggle against a tidal wave of debt.
Clearing up some of these preconceived notions can help you decide if bankruptcy is your best option.
Bankruptcy exemptions
There are two main types of personal bankruptcy to consider:
1. Chapter 7 involves liquidating and selling a person’s non-exempt assets to pay off creditors. To be eligible for Chapter 7 bankruptcy, you will likely need to pass a means test, which is $99,689 for a family of four.
2. Chapter 13, also known as “reorganization bankruptcy,” allows a person to keep their property while repaying debts over an extended period according to a bankruptcy court-approved repayment plan. Chapter 13 is more suitable for those with a steady income.
In both types of bankruptcy, Tennessee has exemptions in place that can help safeguard your property:
- Homestead: Tennessee allows a homestead exemption of up to $35,000 if a minor lives in the house. If not, the exemption can fluctuate depending on your age and filing status.
- Personal: Items such as pictures, necessary clothing, family bible and school books
- Wages: 75% of earned wages
- Tools of trade: Up to $1,900 worth of tools or equipment necessary for your profession
- Retirement accounts: Almost all retirement accounts, including 401(k)s and IRAs, are fully exempt
- Wildcard: A wildcard exemption of up to $10,000 can be applied to any property of your choice, such as a vehicle or furniture
Understanding Tennessee’s bankruptcy laws and exemptions can be challenging. It’s essential to work with someone who can help you navigate the process and choose the best option for your current situation.