If you are like most people living in Tennessee, your home is probably your most valuable asset. Nothing else you own, other than a well-funded retirement account, will have a similar value to that of residential real estate.

Many people spend years saving a down payment and much of their working life paying off their mortgage. It is only natural to want to do everything in your power to protect that investment. Many people will pay their mortgage even if they know they don’t have enough money to pay their other bills that month. It makes sense that if you find yourself considering Chapter 7 bankruptcy, you would worry about the impact of your filing on your home equity.

Chapter 7 proceedings empower the courts to liquidate certain assets to help repay your creditors before they order the discharge of your unsecured debts. Home equity beyond the standard homestead exemption may be among the assets the courts require you to turn over in order to secure a Chapter 7 discharge.

Tennessee exemptions are not forgiving for home equity

In some states where farming or ranching is a major source of income, the state bankruptcy exemptions regarding real estate holdings are liberal and forgiving. Tennessee is not among those states. In fact, if you file as an individual, separately from your spouse, you can only protect $5,000 in home equity. If you file bankruptcy as a couple, the amount of equity you can protect increases to $7,500.

Adults over the age of 62 have slightly higher exemptions. A single filer can exempt $12,500. A couple where both partners are 62 or over can exempt $25,000, while a couple filing jointly with only one partner over the age of 62 can only exempt $20,000.

While other states allow you to use federal exemptions, which may be more forgiving in some areas and stricter in others, Tennessee does not let those filing for bankruptcy choose between state and federal exemptions. You can only use Tennessee state exemptions for your home equity.

The right help can protect your assets in a Tennessee bankruptcy

Some people mistakenly think that because Chapter 7 bankruptcy is a more straightforward process than Chapter 13 bankruptcy, which involves a repayment plan, that they can manage this complicated process without legal assistance.

While you may be able to file the paperwork or even secure a discharge, going through bankruptcy without experienced legal advice could mean making mistakes regarding the property you attempt to exempt or protect. An attorney can help you determine how to make the most of the exemptions, as well as whether your circumstances might make Chapter 13 bankruptcy a better option.