Tennessee residents may know that when people file for Chapter 7 bankruptcy, their property can be sold to help pay down existing debts. In a Chapter 7 bankruptcy, property is collected by the trustee and placed into the bankruptcy estate. This money is distributed to creditors before the debtor receives a discharge of remaining debt. People may be under the impression that all of their property, therefore, will be lost if they file for bankruptcy. This can make some people reluctant to file if they believe they are going to lose everything. However, this is not the case, bankruptcy exemptions help to keep some property from the bankruptcy estate.
In a Chapter 7 bankruptcy, people can exempt a portion of their property. This means that they can keep a certain percentage of their property. These exemptions allow debtors to keep enough property so that they won’t be destitute following the bankruptcy. This property can be used in their new life to help them get on their feet following the bankruptcy.
The exact exemptions that can be taken in a bankruptcy vary by state. Tennessee has its own set of exemptions, therefore. Also, the federal bankruptcy code provides for exemptions. In general, expensive items, luxury items, heirlooms and other valuable personal property is not exempt. This type of property will be added to the bankruptcy estate and sold in many cases.
Exempt property often includes retirement savings, clothing, necessary household goods, appliances and some jewelry. Many exemptions also allow people to keep a certain amount of value in a home and car. A portion of a person’s income, public benefits and money from personal injury settlements is also often exempt from the estate.
A bankruptcy attorney can help people determine how much property would be exempt if they were to file for bankruptcy. In many cases, people are able to keep the majority of their personal belongings.
Source: Findlaw.com, “Exempt vs. Non-exempt Property Under Chapter 7,” accessed Nov. 3, 2014