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Can You Keep Your Home Filing a Chapter 7 Bankruptcy?
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.
One of the main points to consider in deciding whether to file a Chapter 7 bankruptcy is what property you can keep and what property you may have to give up.
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.
For those filers over the age of 62 Tennessee allows an individual a $12,500 homestead exemption. A spouse aged 62 or older who has a spouse under 62 is allowed a $20,000 exemption. A married couple both of whom are over the age of 62 receive a $25,000 exemption.
If a minor child or minor children live in the house then each individual who has custody of that child or children may exempt up to $25,000 of the value of their house. A married couple with a child can therefore exempt up to $50,000.
If you know the amount of equity you have in your home then you can determine the likelihood of a Chapter 7 Trustee trying to sell your home in a Chapter 7 bankruptcy. If your equity is less than your entitled exemption your creditors and Chapter 7 Trustee will nto be able to sell your home.
In the case where your exemption is less than your equity then you have two choices; pay the difference to the Chapter7 Trustee, or allow the Chapter 7 Trustee to sell your house.
The last point to consider is that you usually do not want to file a Chapter 7 if you are behind on your mortgage payments. When you are behind on your mortgage, a Chapter 13 might be a better option for someone wanting to keep their home.
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