Can You Keep Your Home Filing a Chapter 7 Bankruptcy?

by Alan Alder

A Chapter 7 bankruptcy is also known as a liquidation bankruptcy. This means that any property that a Chapter 7 filer has that is not exempt may be liquidated or confiscated and sold to pay off debts.

It is imperative that you know what property is exempt, and therefore property you can keep, and what property is not exempt before you file a Chapter 7 bankruptcy.

Tennessee exemption laws allow a single person to keep up to $5,000 of their home’s value. While married couples can exempt up to $7,500.

Tennessee law exempts up to $12,500 of the value of a home if the individual filing bankruptcy is 62 years of age or older. If a married couple files a Chapter 7 and one spouse is 62 years of age or older and the other spouse is under 62 years old Tennessee laws provides for up to a $20,000 exemption. If both spouses are 62 or older the exemption rises to $25,000.

Tennessee law grants a $25,000 homestead exemption for an individual filing a Chapter 7 who has at least one dependent child. This exemption doubles to $50,000 when a married couple with at least one dependent child files a Chapter 7.

The amount of equity in your house is important to know when considering Chapter 7. If your exempted amount is more than your equity then there is no chance a Chapter 7 Trustee will seek to sell your house to pay creditors.

Filing Chapter 7 when your equity exceeds you allowed exemption may result in either yu having to pay the difference to your creditors or the Chapter 7 Trustee selling your house and paying creditors with the proceeds, minus your exempted amount.

Chapter 7 is probably not a good option if you are behind on your mortgage payment. In that case, a Chapter 13 is probably a better alternative for those wishing to keep the home.

About the Author:
Alan Alder is a licensed Tennessee attorney. He has been practicing Chapter 7 bankruptcy in Nashville for over five years. Learn more by visiting his Tennessee bankruptcy attorney website.

Published by: Alan Alder on June 30th, 2009 | Filed under Legal



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