Filing for Bankruptcy While Owning Real Estate in Tennessee

Filing for bankruptcy while owning real estate in Tennessee can be a complex process that requires careful consideration and understanding of state and federal laws. Bankruptcy is designed to provide relief to individuals overwhelmed by debt, but real estate ownership introduces additional factors that must be navigated during the filing.

In Tennessee, individuals typically file for either Chapter 7 or Chapter 13 bankruptcy. Each chapter has different implications for real estate ownership. Chapter 7 bankruptcy involves the liquidation of non-exempt assets to repay creditors, whereas Chapter 13 allows individuals to create a repayment plan to keep their assets, including real estate.

When filing for Chapter 7 bankruptcy in Tennessee, the status of your real estate is crucial. Tennessee has specific exemptions that protect a portion of the equity in your home. As of 2023, Tennessee residents can exempt up to $5,000 in equity for a single individual or $7,500 for a married couple. This means if your home equity falls below these limits, you may be able to retain your property during bankruptcy.

In contrast, if you file for Chapter 13 bankruptcy, you can keep your home even if you have more equity than the exemption limits. Chapter 13 allows you to propose a repayment plan to manage your debts over three to five years. During the repayment period, you must stay current on your mortgage payments to avoid foreclosure.

Another important aspect to consider is the type of real estate you own. Your primary residence is typically treated differently than investment properties or second homes. Investment properties may not be protected under the same exemption laws, and creditors may seek to liquidate them to satisfy debts.

In Tennessee, failure to keep up with mortgage payments can lead to foreclosure, which is a risk that individuals filing for bankruptcy must consider. If you are behind on mortgage payments, filing for Chapter 13 may help you catch up on missed payments over time while allowing you to retain ownership of your home.

It is also vital to approach the situation with transparency. Failing to disclose real estate ownership during the bankruptcy process can lead to complications, including the potential dismissal of the bankruptcy case or even bankruptcy fraud charges. Always report all assets accurately when filing.

Consulting with a bankruptcy attorney experienced in Tennessee law is advisable to navigate the specifics of your situation. They can provide tailored advice based on your financial circumstances, the type of bankruptcy that suits your needs, and the best strategy for retaining your real estate.

In summary, while filing for bankruptcy in Tennessee when owning real estate can present challenges, understanding the laws and exemptions available can help you successfully navigate the process. Consider the type of bankruptcy that aligns with your financial goals and ensure that you are fully informed about your rights and responsibilities.