Bankruptcy and Property Taxes in Tennessee

In Tennessee, the intersection of bankruptcy and property taxes is a significant concern for homeowners experiencing financial difficulties. Understanding how bankruptcy impacts property tax obligations can provide clarity for those facing challenging economic situations.

When individuals file for bankruptcy, they hope to alleviate the financial burden created by debts, including property taxes. There are two main types of bankruptcy filings: Chapter 7 and Chapter 13, each affecting property taxes differently.

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy, often referred to as liquidating bankruptcy, allows individuals to discharge certain unsecured debts, yet it does not eliminate secured debts such as property taxes. Homeowners in this situation are still responsible for paying any outstanding property taxes on their homes. If these taxes remain unpaid, the local government may pursue foreclosure actions against the property.

However, Chapter 7 can provide some relief in other areas. It can be used to eliminate unsecured debts, freeing up income that can then be redirected toward paying property taxes. It's essential for homeowners to stay current on property taxes even during bankruptcy to prevent potential loss of their home.

Chapter 13 Bankruptcy:

For those looking to retain their properties, Chapter 13 bankruptcy offers a more favorable option. This type involves a repayment plan that allows individuals to pay off their debts over three to five years. Homeowners in Chapter 13 can include their past-due property taxes in their repayment plan, allowing them to spread payments over the life of the plan, thus making it more manageable.

To qualify for Chapter 13 bankruptcy, individuals must have a regular income, which provides them the ability to make monthly payments towards both their debts and any accruing property taxes. Once in the Chapter 13 repayment plan, any penalties or interest accrued on the property taxes may also be handled within the terms of the bankruptcy, alleviating some of the financial pressure.

Property Tax Exemptions in Tennessee:

Tennessee offers several property tax exemptions that can benefit homeowners, especially those in financial distress. Veterans, the elderly, and individuals with disabilities may qualify for specific exemptions that can reduce their property tax liability. Understanding these exemptions is essential for those who may need additional financial relief during or after bankruptcy proceedings.

Conclusion:

Navigating bankruptcy and property taxes in Tennessee can be complex, but understanding the implications of each bankruptcy type is crucial for homeowners. Individuals facing financial strain should consider consulting with a bankruptcy attorney who can provide tailored advice based on their specific circumstances, ensuring they make informed decisions regarding their property and tax obligations.