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Posted by: Joshua McCloud
Tennessee is world-famous among music lovers, and it isn’t hard to see why. Crossing the state along I-40, drivers can quickly access such musical landmarks as Graceland in Memphis, the Country Music Hall of Fame in Nashville, and Dollywood in the Great Smoky Mountains. Thanks in large part to the tourism driven by attractions such as these — and the economic might of other industries captured in Tennessee’s motto — Tennessee has all but left the Great Recession behind.
But even though the state has recovered from the economic woes of the last decade, enjoying a record low unemployment rate in July 2017, not everyone in the state has been so lucky. Between July 2016 and June 2017, more than 14,000 Tennesseans filed for bankruptcy protection under Chapter 7 of the U.S. Bankruptcy Code.
This post provides a general outline of Chapter 7 bankruptcy in Tennessee. However, it cannot provide specific information as it applies to your circumstances. If you think Chapter 7 bankruptcy might be right for you, consult an experienced Tennessee bankruptcy attorney for help and more information.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy. In it, a bankruptcy case trustee collects a debtor’s non-exempt property, sells it (hence, “liquidation”), and applies the sales proceeds to the debtor’s outstanding unsecured debts. At the case’s conclusion, the bankruptcy court will discharge most remaining unsecured debts. Some debts cannot be discharged in bankruptcy, such as student loan debt and tax debt.
What property is exempt, and what is non-exempt, depends on state law. The Bankruptcy Code includes a list of bankruptcy exemptions, but permits states to devise their own such list. Some states allow their residents to choose between state and federal exemptions, but Tennessee requires residents to use its own state exemptions.
For more background information on Chapter 7, see How Chapter 7 Bankruptcy Works.
Who can file for Chapter 7 bankruptcy in Tennessee?
However, just because a bankruptcy case is properly filed in Tennessee does not mean that Tennessee’s bankruptcy exemptions will apply. Rather, the bankruptcy court where the case is filed will use the bankruptcy exemptions of the state where:
- The debtor has lived for two full years prior to filing; or, if the debtor has moved in that time,
- Where the debtor lived for most of the six months immediately preceding the two years before filing.
Example: Troyal files for Chapter 7 bankruptcy in Tennessee on October 2, 2017. He has lived there since January 1, 2017. Before then, he lived in Iowa his entire life. Because Troyal has lived in Tennessee for the six months before filing, venue is proper in Tennessee. However, because he moved to Tennessee in the last two years, the court will use Iowa’s exemptions.
Tennessee’s Bankruptcy Exemptions: Can I keep my property?
Tennessee has “opted out” of the federal bankruptcy exemptions. As a result, when Tennessee law is used to determine bankruptcy exemptions, debtors can only use the exemptions defined under Tennessee law. They cannot use the federal bankruptcy exemptions defined in the Bankruptcy Code.
Some of Tennessee’s most significant bankruptcy exemptions are outlined below. When an exemption is limited to a certain value, that value refers to a debtor’s equity in the property described — that is, the difference between the market value of the property and any debts secured by that property.
Example: Rebecca owns a car worth $15,000. She owes $10,000 on a car loan she used to buy it. Her equity in the car is $5,000, so she can exempt it as personal property in a Chapter 7 bankruptcy in Tennessee.
Except as otherwise noted below, when spouses jointly file for bankruptcy, they may “double” their exemptions. That is, each spouse can exempt property up to the limits specified in Tennessee law.
Tennessee Bankruptcy ExemptionsThe top 5 exemptions under Tennessee state law.
|Type of exemption||Tennessee law|
|Homestead||Up to $25,000, depending on age and family status|
|Personal property||$10,000 aggregate value, plus $1,900 in tools of the trade, clothing, health aids, family books, and more|
|Vehicle||None, but you may use personal property exemptions|
|Wages||75% of disposable earnings or 30 times the federal minimum wage; can be increased by $2.50 per week for each dependent child under 16 years old|
|Pension/retirement||Qualified retirement plans are exempt, plus protections under federal law (with limits on IRAs and Roth IRAs)|
Tennessee exempts a person’s home from liquidation in a bankruptcy case. For the sole owner of a home who doesn’t meet any of the requirements listed below, that exemption is limited to $5,000. However, the following individuals are eligible for a higher exemption:
- Joint owners (e.g., spouses): $7,500
- Individual at least 62 years old: $12,500
- Married couple, only one of whom is at least 62 years old: $20,000
- Married couple, both of whom are at least 62 years old: $25,000
- Individual with custody of one or more minor children: $20,000
Unlike many states, Tennessee does not provide an exemption specifically for automobiles. However, because automobiles are personal property, they may be exempted under the personal property exemption described below.
Other Personal Property
Tennessee specifically exempts the following types of personal property:
- Clothing used by the debtor and his or her family.
- Family portraits and pictures.
- The family Bible and school books.
- Archer medical savings accounts and health savings accounts.
- Certain welfare and insurance benefits.
- Subject to an aggregate limit of $15,000:
- A crime victim’s reparation award of up to $5,000;
- Compensation for personal injury up to $7,500; and
- Compensation for wrongful death up to $10,000.
- Any implements, professional books, and tools of the trade to an aggregate value of $1,900.
- Prescription health care aids.
In addition, Tennessee provides an exemption for other personal property to the aggregate value of $10,000. However, an item purchased with or maintained by fraudulently obtained funds is not eligible for this exemption.
Tennessee exempts the greater of the following portions of disposable earnings from garnishment:
- 75% of disposable earnings for a workweek; or
- 30 times the federal minimum wage.
This exemption can be increased by $2.50 per week for each dependent child under 16 years old.
However, both the U.S. District Court for the Eastern District of Tennessee and the U.S. Bankruptcy Court for the Western District of Tennessee have held that this exemption is not available in bankruptcy cases.
A debtor’s interest in a qualified retirement plan is exempt under Tennessee law. Such plans are also protected under federal law, even in opt-out states like Tennessee. However, federal law exempts IRAs and Roth IRAs only up to $1,283,025.
Where are the bankruptcy courts in Tennessee?
Tennessee is divided into three federal court districts.
Chapter 7 bankruptcy cases in the eastern part of the state are filed with the U.S. Bankruptcy Court for the Eastern District of Tennessee. It has four locations, although the Winchester office is unstaffed:
Chattanooga: 31 East 11th St., Chattanooga, TN 37402, (423) 752-5163
Greeneville: 220 West Depot St., Ste. 218, Greeneville, TN 37743, (423) 787-0113
Knoxville: 800 Market St., Ste. 330, Knoxville, TN 37902, (865) 545-4279
Winchester: 200 S. Jefferson St., Winchester, TN 37398, (423) 752-5163
Chapter 7 bankruptcy cases in Tennessee’s middle counties are filed with the U.S. Bankruptcy Court for the Middle District of Tennessee. The Middle District’s main office is located in Nashville, but it maintains two satellite offices in Columbia and Cookeville. Their addresses are:
Nashville: 701 Broadway, Rm. 170, Nashville, TN 37203, (615) 736-5584
Columbia: 815 South Garden St., Columbia, TN 38401
Cookeville: 9 E. Broad St., Cookeville, TN 38503
Finally, Chapter 7 bankruptcy cases in the western part of the state (see here for a list of counties served) are filed with the U.S. Bankruptcy Court for the Western District of Tennessee. It has two locations:
Memphis: 200 Jefferson Ave., Ste. 410, Memphis, TN 38103, (901) 328-3500
Jackson: 111 S. Highland Ave., Ste. 107, Jackson, TN 38301, (731) 421-9300